Ladies and gentlemen, thank you for standing by, and welcome to the ICL Analyst Conference Call. Before we begin, I must advice you that today’s web seminar is being recorded and that all participants are currently in a listen-only mode. The presentation today will be followed by a question-and-answer session. [Operator instructions]. Now without any further delay, I would like to hand the conference over to your first speaker today, Limor Gruber, Head of IR. Please go ahead.

Thank you. Hello, everyone. Welcome and thank you for joining our fourth quarter 2016 conference call. Earlier today, we filed our press release to the Securities Authorities and the stock exchanges in the U.S. and in Israel. The press release is available also on our website. For your reference, this meeting is being webcast live at www.icl-group.com. There will be a replay available a few hours after the meeting and a transcript will be available within 48 hours. The presentation that will be reviewed today was also filed to the Authorities and is available on our website. Please don’t forget to review Slide #2 with the disclaimer. 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. Today, we will start with a presentation by our Acting CEO, Asher Grinbaum; followed by Kobi Altman, our CFO. In addition, ICL executive are either here or on the line, and will be available for questions following the presentation. Asher, please.

Thank you, Limor. Good morning, good afternoon to all of you around the world. Starting from Slide 3 and looking back at 2016, this has definitely been a challenging year for ICL. The business environment in commodity fertilizers has been under significant pressure, which required us to make tough decisions. We adjusted our spending investments to these changing conditions and focused on the variables we could control. I am proud of the ICL team for the progress we made under difficult circumstances and we closed 2016 in a stronger competitive position as a result of these efforts. Our annual and quarterly results reflect our unique business model, where our specialty business provides a balancing effect to the commodity downturn and helps us achieve better performance compared to many of our peers. The significant negative pricing impact on our operating profit for the year which amounted to $580 million was mitigated by operational and commercial excellence initiatives, which helped us to improve our production and sales volumes, reduce our cost and increase the value from our products and services. These initiatives contributed more than $100 million compared to 2015. Cash flow optimization measures contributed to yet another quarter of strongly positive operating and free cash flow. The breakdown of Slide 4 demonstrated the diversification of our business and highlights why ICL is in a unique position compared to most of our commodity based competitors. Our business diversification is a big advantage, especially during downturns, and volatility that characterizes the agriculture cycle. We believe that our specialty solutions businesses will continue to act as a stabilizing factor. The results of the growth in our specialty solutions during the downturn in the potash and phosphate fertilizers markets are clearly demonstrated on Slide 5. In 2016, more than 60% of the operating income came…

Thank you, Asher. Good day everyone. I will start with our financial results on Slide 10. Overall we are pleased with the solid quarter’s performance in a middle of a commodity turmoil. The fourth quarter is traditionally a weaker quarter for ICL due to seasonality, and despite this, we had good achievements in both our Essential Minerals and Specialty Solutions division, as well as ICL cash generation power. Both quarterly and annual sales was similar to the level in the comparable periods. This is a great achievement in light of the price pressure that we faced, particularly in the commodity market. We cannot control commodity prices but we were able to offset some of the negative impact by improving what we can control, focusing operational excellence to reduce cost and improve production utilizations and/or commercial excellence including innovation, pricing initiatives, improved portfolio, geographical expansion and customer relations, all of which continued to contribute to the balancing effect of our specialty businesses. The measures we have taken to reduce our cost and working capital, along with our disciplined approach to CapEx, have made it possible to record another strong quarter of operating cash flow and positive free cash flow in contrast to the broader commodity sector, which resulted in a reduction in net debt in the quarter. Cash flow generation will continue to be priority for the company. I am pleased with our achievements in the past few months to settle several legal fronts, which were significant overhead for several years with only moderate financial impacts. This includes the conclusion of an arbitration proceeding between Dead Sea Works and Haifa Chemicals, the conclusion of proceedings regarding prior year's tax assessments by the Israeli tax authorities, the dismissal of a motion for a certification of a class action against the company that…

Thank you very much. [Operator Instructions]. And your first question comes from the line of Patrick Rafaisz from UBS. Please go ahead.

Thank you, and good afternoon, everybody. Couple of questions. First on the optional volumes you shipped to China. Can you quantify how much that was, and how much that could be potentially in 2017? Then on cash flow, you mentioned the strong collections in Q4, which helped a lot to improve the year-on-year performance. Would you agree that this creates a pretty tough base to beat in 2017, i.e. that working capital intensity is unlikely to improve further next year or this year? And then lastly - sorry, there are three questions. For Specialty Fertilizers, do you have a view on when the competitive pressure could start to ease in this segment? Thank you very much.

Okay, I would like - Asher speaking - I would like to convey the question to - the first two questions to Kobi and afterwards to Nissim.

Okay. I will talk about the cash flow, and Nissim you will talk about the quantities to China. On the working capital and cash flow, yes, Q4 was particularly strong due to the collection in this fourth quarter. We do expect a weaker cash flow generation quarter in the first quarter of 2017, but still we expect 2017 to be a very strong year of cash flow generation. But to your question, yes, Q1 will be lower than 2017. We also still plan to further reduce our working capital in 2017. We still believe that there is room to further improvements in our working capital. It might not continue to be this dramatic reduction in future as like we experienced in 2016, but at least in 2017 we still expect to see some improvements. Nissim?

Okay. In regards to the contract supply to China, so first of all, we fulfilled our obligation of the contract. We don't have a flow or maybe little quantities to flow to 2017, and of course all of us waiting now for the next milestone of signing the next contract in China, which at least rumors from the markets is expected to be by the end of first quarter.

Do you have any view on the price points with the first contracts?

Look, we hope that the price will go up.

Understood.

Thank you. So your next question then comes from the line of Vincent Andrews from Morgan Stanley. Please go ahead.

Hi. This is Neel Kumar calling in for Vincent. You had a comment in your press release about having [indiscernible] for phosphorus-based flame retardants in the quarter as a result of the stricter environmental regulation in China. I'm just wondering if you expect this trend to continue in 2017 for Chinese producers to continue to have these issues?

Eli, please.

As we can see now, we believe that the regulation in China will continue in that same direction, and according our forecast, our quantities will become or will stay as it is now.

Got you. And I was also wondering if you could talk about the price you’ll be able to get for Polysulphate in the fourth quarter, and how do you expect prices to be affected as you increase the volumes?

Nissim?

Okay. Polysulphate is a successful move of penetration to the market with new products and these products has a wider character if it’s a unique product with four nutrients and it's accepted in the markets in the successful way, we expect that prices of Polysulphate will follow the prices of the different nutrients in the formula. So if prices of potash are in positive momentum, and this is what we see in the last weeks, I expect that the Polysulphate prices will follow this positive momentum.

Great. Thanks.

This is Asher. Taking - it was a question about the specialty fertilizers situation in China. We believe that it's a direct relation between the specialty fertilizers, mostly based on phosphates and what’s going on in the phosphate market and we expect that once it will be some recovery in the phosphate market, we should see immediately also in the specialty fertilizers.

So your question comes from the line of Joel Jackson from BMO Capital Markets. Please go ahead.

Hi. Good afternoon. I wanted to go back to some of your commentary on potash production. Can you help us understand - like you produced 5.3 million tons of potash in 2016, what will 2017 and 2018 look like? And you talked about the U.K. Boulby being down 300,000 tons because of, of course the transition to Polysulphate. You will be taking that offline presumably in 2018. And then you're ramping up your expansion at some point in the next little while in Spain of Iberpotash. So will potash production in 2017 be down 300,000 tons versus 2016, and then what will ‘18 look like, or please correct me?

As you said, the mine in U.K. is focused on Polysulphate and the reduction of 300,000 ton of potash will be partly compensated by all the operational excellence which we do in Dead Sea, and in order to compensate as much as possible of this quantities. So what we will see in 2017, maybe it’s slightly less quality than 2016, but not dramatic.

And then what will 2018 look like with the different puts and takes?

In 2018, I expect to continue with this approach in Dead Sea to continue to debottleneck. We will not be, again compensate fully the reduction but mostly, and in 2019, I expect that the Spanish mine will start to add the additional quantities.

So does that mean we should expect the U.K. potash mine to produce about the same amount of potash in 2018 and 2017?

Yes.

Okay. Thank you for that. So my next question is on phosphates as well. So you talked about that the goal with the JV in China is to just minimize the losses. Obviously this is a reasonably recent investment and a large investment. You learned a lot about it. It sounds a good opportunity has soured. At what point, even though it's a new investment, would you consider walking away from this investment?

Walking away is not in our agenda. And look, this joint venture is suffering heavily from the huge reduction in the phosphate prices. Just to give you rough idea, in 2016, the prices reduction influenced $100 million in the bottom line due to this. So we compensated partly this by efficiency measures and other operational excellence activities, which we’ll continue to do also in 2017. If what we see in the last weeks is positive trend of phosphate prices will continue, then we will see here a different picture. We have still lot to do in operational excellence and cost reduction, and of course we are analyzing the options how to optimize this activity.

I would like to add to Nissim - Asher speaking - that our talent and our target is very challenging, so we are analyzing and we are pushing the price reduction of course and operation excellence, the commercial excellence. We are checking also the mix of the products that we are producing there and we believe that with all the efforts that will be done, we shall minimize the losses in this joint-venture, and miss in sales, we don’t have in the agenda any, let's say, programs to shut down or to walk out from this joint venture.

Okay. One more question please. You did very well with your potash costs per ton in the quarter. You also drew down lot of potash inventories. You had pretty high inventories in Q3. You have achieved costs like this before but they've been higher in recent quarters. In 2017, what should potash costs look like, should they be more on the average of 2016 numbers, or is Q4 a good cost to model for the year?

Okay. As I told before, we are doing a lot of activities in our sites to reduce our cost and to optimize our processes. And in the last - and we started this process even before the prices started to go down. And I think we are now enjoying the results of these efforts by reducing our cost. This process of reducing cost will continue over in the coming years. So from this point of view, I am comfortable with our competitive edge and this process will continue.

So, I mean, will 2017 cost on average be lower than ‘16? Is the Q4 number a reasonable rate to move forward for ‘17?

Joel, you can take the fourth quarter number as a good estimate for 2017.

Okay. Thank you very much.

Thank you. And your next question then comes from the line of Georgina Iwamoto from Bank of America Merrill Lynch. Please go ahead.

Hi. It's actually Steph Bothwell from Bank of America Merrill Lynch. Just a couple of quick questions from my side. So firstly, on the CapEx guidance for 2017. If I look at your presentation, it looks like the upper end of the range is in and around $610 million in terms of total CapEx. I wondered if you could perhaps split that out between growth CapEx and maintenance CapEx, and on the growth side, perhaps give us a little bit of detail in terms of where you will be spending? And the second question is on elemental bromine prices, which you flag are still quite elevated in China. Perhaps some sense in terms of where you’d expect the prices to go for elemental bromine as we proceed into the year? Thank you.

Charles.

This is Charles Weidhas speaking. I'll address the question around CapEx. So without giving a specific number, the majority of the CapEx that we’ll be spending in 2017 is geared towards maintaining our capacity, operational safety and environmental performance as well as cost reduction. But there still is an amount there that is for selected growth projects in our Specialty Division and a little bit in our Essential Minerals Division. Regarding the question on bromine, I'll turn it over to Eli Glazer.

Hi. It’s Eli Glazer speaking. Related to bromine prices in China, we anticipate that the prices in China will remain at this level they are now.

Okay, thank you. And just to follow-up on the CapEx point. Can you perhaps quantify how much is related to growth CapEx and how much is maintenance? I mean, what is the proportion that you’ve left for growth spend?

Okay, sorry. Asher speaking. For the growth CapEx, we have close to $100 million and to maintain the capacity we have about $150 million.

Okay. That's very helpful. Thank you very much.

Thank you. Your next question comes from the line of Abbas Ali from JPMorgan Asset Management. Please go ahead.

Hi. Good afternoon. I have two questions. One, if you could just give a few more details on the impairment of assets that you took this year and that you also used in the calculation of your adjusted EBITDA? And secondly, on the liquidity position. The cash on the balance sheet is, I guess, relatively low. It will go down even further post the dividend payment. So what are your funding plans for this year? If you could give some color on that. Thank you.

Abbas, thank you. On the impairment of assets, we didn't have much in the fourth quarter. For the full-year results, the main item there is the discontinuing of the projects that we had announced in the third quarter, the potash projects in Ethiopia as well as the information system project - the global harmonization project, what we call. Those are the main items that you also see in the EBITDA calculation, but this belongs to the third quarter. In the fourth quarter, we did not have one. In terms of cash and capital funding, we ended the year with around $3.4 billion of net debt. This is the same level that we ended the previous year, which is a very, very nice achievement because we started 2016 with a significant investment in our partner in China of $250 million, and we were able to go down to reduce the debt level to the level of the beginning of 2016. Cash generation will continue to be strong in 2017 and this will satisfy all our cash needs, so we do not expect further increase in our net debt. To be opposite, we also would like to continue to see slight decline in debt during this year as well, and to finish the year with a net debt to EBITDA ratio of less than 3.5. This is our current target for 2017.

Thank you very much.

Thank you. And your next question comes from the line of Howie Flinker from Flinker & Company. Please go ahead.

Hello, everybody. I have two minor arithmetic questions and a bigger question. Your inventories dropped year-over-year, is that because of price or because of a reduction of units? That's the first question.

This is because of our program to reduce the working capital.

So, quantities, yes, quantities.

Quantity. Okay, good.

The quantities, of course.

Good. Thank you. Second - my memory fails me. Did you own the 15% of the Chinese joint-venture for much of last year's fourth quarter or not, so I can compare mentally?

We invested in the joint-venture. In the 15% if you ask in our partner, we invested in January 2016, so it was not in our balance sheet at the end of ‘15. The joint-venture itself, if that was your question, started in October, so one quarter of working in 2015 versus four quarters in 2016. But the comparison of the fourth quarter - if you compare Q4 ‘16 to Q4 ‘15, in these two quarters already we're with the joint-venture operation.

All right, that's clear also. And finally, at the beginning you said one of your efforts this year will be to raise price. In a tough market like this with plenty of supply, how do you do that?

When we talk about price levels, we talk about our specialties and not about the commodities.

I see. Okay. That makes it clear. Thank you very much [indiscernible].

Thank you. [Operator Instructions]. And your next question comes from the line of Yonah Weisz from HSBC. Please go ahead.

Yes, good afternoon. Just a question on clear brine drilling fluids which are based on bromine, with the slight recovery in oil prices, do you feel any - from your clients, any increased demand or any possibility to increase prices for this product? Thank you.

Eli Glazer speaking. In the last year, we saw some reduction in the market and we still see some good demand and we [Technical Difficulty]. In general, we see quite flat market for the coming year. In other words, it's not a big reduction vis-à-vis the last quarter.

Your next question comes from the line of Andrew Benson from Citi. Please go ahead.

Thanks very much. I was disconnected from the call a few times, especially when you were talking about potash and polyhalite, so I do apologize for all the analysts just for asking the same question. But can you just give an idea of the volume or price for polyhalite? You talked I think about lower volumes of potash this year. I just wanted to confirm that, because as I said, I couldn't hear it, and I presume that that's the absence of ability to further destock? And also on potash, you talked about your hope for the prices will go up with the China contract and you hoped it would be signed by the end of March. I just wondered what that hope was based on?

Okay, let's start from the end. Prices for potash in the last weeks what we see is that it already bottomed and we see some recovery of prices in different markets. Based on what we hear from the markets, the expectation also in China for a price increase. Now my estimation, and this is again my view, is that during the first quarter, it might be up after now the Chinese holiday start of negotiation might be will end by the end of the first quarter, but no guarantee here. It's really negotiation, and based on the past experience, it can take long time, it can take short time. What I can say is that the inventory in China is lower than in 2015, which would help to boost the negotiation. In regard to Polysulphate prices, right now there is a linkage between what is going on with the prices of potash to the Polysulphate and I expect that this will continue in the future. Now remember we are in a penetration situation in Polysulphate. We’re still in the education of the market, education of the farmers. We do a lot of field work and I don't expect that in the short-term we see here different price of Polysulphate compared to what we have today.

Okay. All right, thanks very much.

[Operator Instructions]. And your next question comes from the line of Gilad Alper from Excellence. Please go ahead.

Yes, hi. Thanks for taking my call. My question is about the outstanding issues between ICL and the State of Israel, the Barir field regarding phosphates, the 2030 concession, other issues that are outstanding. Is there any progress? Are you guys waiting for something to happen? Are you just stuck in a standstill with the State because obviously all of these issues have huge issues - have huge impact on valuations, your investment options in Israel, so what's going on with the State of Israel? Thanks.

Kobi?

Hi Gilad. The relationship with the government of Israel is currently working well. In the last few months, we made some significant moves. I will just mention what I mentioned earlier. The settlement with the tax authorities on prior year taxes, and the discussions are now much more constructive, and to the point obviously is mining and doing a lot of operation in Israel, the discussions are on a day-to-day basis. Discussions on the Barir is currently not with the government. It's with the hearing committee. We are participating in those discussions. We provide information as needed, and it’s very helpful for us to predict where this would stand, and this we believe will continue for some times. Very hard to predict right now where it will end. On the 2030 things, I believe that this is something that probably for Israel will be remain under discussions for future years. We don't see any rush for - any reason for a rush for the Israeli country to take decisions or any actions. Right now this is something that can still wait for days to come and many things can still happen in this volatile commodity market, and right now we don't see any activity and so we are not involved in that at this moment.

Okay. That means basically that you barred or - well, you’re kind of barring yourself I guess from making any large investments in Israel given that you don't know what the return is going to be, given that you don't know what the new concession is going to look like. Right?

Well, we continue to invest in Israel on an ongoing basis. We mentioned the operational excellence that we continue to do. We are the large employer in the south of Israel. We are very, very proud of that and we continue to do that. We are the largest taxpayer in Israel and we are very proud of this as well. Significant enhancements in Israel, if and when the time will come and obviously in a downturn in a commodity cycle, this is not something that is currently on the table, but if time will come, we will discuss it with the government, and I'm sure we will find solutions for that as well that will satisfy the need of both parties.

Okay. Thanks.

Thank you. And there are no further questions, I’ll hand the call back to you for any closing remarks. Thank you.

Thank you. Thank you everyone for joining us today. We look forward to talk to you again. And if you have further questions, we are always available. Thank you. Good day.

Thank you very much. So ladies and gentlemen, that does conclude our conference for today. Thank you all for participating and you may now disconnect.