Thank you. Hello, everyone. Welcome and thank you for joining us today to our second quarter 2019 conference call. The event is being webcast live on our website at www.icl-group.com. Earlier today, we filed our reports to the Securities authorities and the stock exchanges in the U.S. and in Israel. The reports as well as the press release are available on our website. The presentation that will be reviewed today was also filed with the Securities authorities and is available on our website as well. Please don't forget to review the disclaimer on Slide number 2. There will be a replay for the webcast available a few hours after the meeting and a transcript will be available within a few days. 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. We will begin with a presentation by our President and CEO, Raviv Zoller; followed by Kobi Altman, our CFO. Following the presentation, we will open the line for the Q&A session. Raviv, please.

Thank you, Limor. Good morning, and good afternoon, everyone. I would like to open with the quarter's highlights on Slide 3. After a strong start to 2019 and despite challenging weather conditions in some key regions, we posted another strong quarter, driven by improved business performance and focus on cash generation. Top line growth of 4%, or 5% excluding contribution of Rovita last year, resulted in an increase of 40% in operating income and 22% in adjusted operating income, translating to an adjusted EPS of $0.12, which is 33% over the same quarter last year. This was a result of solid performance in all three mineral value chains, with higher sales volumes and higher prices in most major product lines. It's important to note that this was achieved despite commodity headwinds, mostly in phosphate markets, due to our diverse business model, our leadership position in key markets and the successful execution of our strategy. We more than doubled our year-to- date operating cash flow and our quarterly free cash flow to support our CapEx needs as well as a dividend of $0.057 per share for Q2, which implies a solid dividend yield of over 4%. Our strict and balanced capital allocation approach, the strategy-driven reduction in debt ratios in recent quarters and consistent margin expansion was not ignored by the rating agencies. Indeed, Fitch Ratings increased our credit rating outlook to positive from stable and reaffirmed our BBB- investment-grade rating. I'm also very proud that our efforts to promote sustainability, transparency and corporate responsibility were recognized by MAALA, a leading non-profit organization in Israel that ranks corporate and social responsibility, granting ICL its highest ranking of Platinum+. These recognitions are a testament to our determined efforts to achieve excellence and leadership in our businesses for the benefit of all of…

Thank you, Raviv, and good day, everyone. As Raviv mentioned, we are proud of the strong financial performance of this quarter, especially in light of the challenging market environment. Let's begin the discussion on our financials with an analysis of the quarter sales on Slide 11. Year-over-year sales growth for the quarter amounted to 4%, or 5% if we exclude the $9 million contribution of the divested businesses to Q2 2018. This growth was fueled by higher sales prices and volumes and was achieved despite exchange rate headwinds, mostly from the devaluation of the euro. The increase in sales volume is attributed to a contribution of $56 million from the Potash division, more than offsetting negative volume impact in the other divisions. We are very encouraged by the fact that the increase in prices was generated from all four divisions and is a result of both higher commodity market prices and our internal value-based pricing initiatives implemented now in all our divisions. Let's turn to our operating income on Slide 12. Adjusted operating income amounted to $230 million, excluding a $10 million reversal of impairment following the divestment of real estate in Germany, more than 20% higher than Q2 of last year. The increase is attributed to $23 per tonne increase in the average realized selling price of potash and higher prices throughout most of the Industrial Products segment's business lines as well as higher selling prices in the phosphate value chain, which benefited from a combination of higher average selling prices of ICL phosphate fertilizers and our internal pricing initiatives in phosphate specialties. Higher sales volumes and lower energy expenses following the activation of the new power plant in Sodom also positively contributed to the increase in operating income. The positive impact of sales volumes and prices was only…

Thank you. [Operator Instructions] Your first question today comes from the line of Joel Jackson from BMO Capital Markets.

Hi. Good morning, Raviv, Kobi, Limor. I had a few questions. So I would start off in the IP segment of bromine. Obviously, bromines are doing quite well, quite resilient earnings, above what we’ve seen before. What should we expect from this business in Q3 and the second half of the year? Are we going to see a step down in earnings? What’s the magnitude? Maybe give us some of the key drivers. Thanks.

Hi, Joel. The business is relatively stable, which means that the pricing environment is good and the demand is pretty stable. In terms of market share, market share is also not changing in the second half of the year. We do see some potential gain in market share. As time goes by and some of the resource in China continues to deplete, that creates opportunity for us. Plus, as we mentioned in the past, we’re working towards signing long-term contracts with some of our clients, and that should also secure and maybe allow us to grow market share. Even though the result has been extremely good and stable, we always want to be careful when we look ahead because we’ve enjoyed exceptional sales in clear brine fluids and our certainty is not – we don’t have complete visibility on to what extent we can expect to continue that kind of strength. As of July, it looks good, but we can never see more than two or three months ahead.

That was very helpful. Thank you. Switching to potash, you ended the second quarter with some of the lowest potash you’ve ever had, especially at the end of Q2. Could you give us some of the timing around Chinese, Indian contracts? What are the ramifications of this in the second half? Also looking at your turnaround in the fourth quarter, should we expect maybe some of your lowest volumes in Q3, quite low to kind of rightsize inventories ahead of the turnaround?

No. Q3 continues to be very similar to Q2. Most of our supply is going to China and Brazil and, to a lesser extent, to India. We’re not constrained in supplying to China, at least until the end of August. Come September, maybe we’ll see the first signs of new contracts in India, but whether it comes in September or not, the placing of product for us is not really an issue. In the fourth quarter, depending on progress with contracts, we expect to be in the same kind of position as last year. We will have about 180,000 tonnes less of products because of the upgrade of our facilities, and it’s a good opportunity to mention that even though it’s costing us $50 million in sales this year, we’re actually going to gain that right back next year, and on top of that, an additional $50 million, which would be a permanent increase to our sales because we’re going through some debottlenecking. But once it’s done, and if there are no issues on the way, and we don’t expect any significant issues, then we will have additional capacity on a regular basis. So we’ll go up from 3.8 million tonnes to 4 million tonnes, it’s an additional $50 million of sales, most of which are streamlined through to the bottom line in the next few years. So the short answer is that the third quarter will be very similar to the second quarter. Fourth quarter, depending on how things develop with the annual contracts, we expect that most of the movement will be towards the annual contracts, but in our case, there’s not that much product in terms of placing that product. If it doesn’t go to China and India, it will go to Europe and Brazil.

That’s helpful. My final question is, in the first half of the year, the Phosphate Specialty business has seen pretty strong contraction. In contrast, the phosphate commodity business has seen strong revenue growth. I mean, I guess, ideally, you’d want it the other way around, what does that look like in the second half of the year and what do you think about that?

It’s a little misleading because some of the contraction is in white phosphoric acid, which is the lower-value product, what we call specialties, and a lot of the downfall in specialties has been either on our dairy business for specific reasons having to do with production, or white phosphoric acid. Actually, on the salt and the special products, we didn’t lose any ground at all. In fact, our profitability grew. And we also have some breakthrough developments on meatless meat and other special products, which are looking very positive going forward. So we’re making progress with our strategy to be more on the specialty business, and the numbers don’t completely reflect that, but that’s mainly because of less white phosphoric acid and dairy products. And while white phosphoric acid, we can’t predict at this point when that will turn around, everything else is behaving very nicely.

Thank you very much.

Thank you. Your next question comes from the line of Mark Connelly from Stephens. Your line is open, sir.

I’m sorry, this is actually Joan Tong on for Mark Connelly. And I have a couple of questions here. First off, on potash, it seems like your cost positions has improved quite a bit. Was it just energy? Or is it like more than that? I just want to see that it’s sustainable going forward.

It’s more an issue of production in terms of quantities of production, energy also not fixed in. It wasn’t a dramatic change. Actually, in Spain, we even have a higher cost this year, which we hope that by the end of the year will balance out. All-in-all, according to plans on production costs, energy results according to the plan. And yes, it does improve our cost position relative to others. By the way, the update that I mentioned earlier will further increase our cost competitiveness, which was basically, it gets us 5% more production with our main site without adding any fixed cost.

Okay. And then for the phosphate business, we have heard the Chinese producers in – are looking to cut production in the near term, and – but we haven’t seen any major cuts in response to environmental regulations. Do you think the producers have found a way around those regulations? Or do you think that the cuts are still coming?

No, I think that when a decision is made in China, they’re usually in new business, and we do see the producers of – the phosphate producer is cutting down on production, naturally from the time it’s announced until it actually happens, takes time. Also there’s a sort of a crackdown on P4 producers, which will also affect production in China. And typically, what happens is some smaller producers tend to shut down, while the larger producers usually find a way to deal with the situation and resume their normal business pretty soon. So yes, there is movement in China. We don’t see all of the impact yet, but we expect that we will see, because usually, when these things are announced in China, they actually happen.

Okay. And then, finally, just wondering, how should we think about Ag Solution – Innovative Ag Solution in the second half of this year? You mentioned about – you mentioned the digital platform that you’re developing. I’m just wondering, like, how should we think about sales in the second half? And also, like any potential of margin expansion, given like the potentially elevated cost that you mentioned.

Okay. I’ll start by saying that the total contribution of that business, the result is relatively low, and typically, the seasonality is actually better in the first half because we sell into the Northern Hemisphere, and the season is in the first half of the year, so the profitability actually is expected to be less than the first half of the year. At the same time, if the first half of the year, because of weather and other reasons, the results were less than the first half, last year, we don’t necessarily expect that to happen in the second half of the year. There is some additional cost here because of development, including the digital platform but that’s relatively negligible. It’s about – it’s going to come up to about $1 million a quarter by Q4, and that’s not going to add any revenue in the short run. So that’s not really going to affect the short-term business, it is going to have a long-term effect with strategic effect. We are making the investments we think are relatively small to the relatively ambitious plans that we have. So again, second half is going to be less than the first half. It’s going to compare better to the second half of last year as in the first half compared to the first half of last year. There is some additional cost, but at the end of the day, it’s relatively marginal when we look at the results as a whole.

All right. Thank you so much.

Thank you.

Your next question comes from the line of Vincent Andrews from Morgan Stanley.

This is Jeremy Rosenberg on for Vincent. And thanks for taking my questions. Just wanted to start out on phosphate. I see on the slide, you mentioned something about synergies, I just wanted to know if you could just clarify what – which synergies you’re referring to?

Okay. A year ago, we merged three separate P&L businesses and the whole phosphate mineral chain has been channeled towards phosphate specialties. In the process, we’ve closed the plant. We’ve tightened some of our cost structure, including a significant reduction in labor costs. And we also have the ability to manage some of the residual materials that we create in production in a more effective manner. So those are the types of synergies, including working capital synergies that were also created. And as time goes by, and some of our new developments turned into specialty products sold in the market, such as meatless meat products that we sold for the first time just a few weeks back, which is an insignificant deal that will become significant in the future. As that kicks in, then we’ll get more efficiency out of our phosphate chain. So it’s less labor costs, less infrastructure and depreciation costs, which means less fixed cost. Product development that are being focused and channeled into new customers and new sales, and focusing all the production towards the specialty. So anything that doesn’t go to specialty becomes residual products that can be sold in commodity markets, including residual materials that came out of the production process. And in the past, not all were turned into cash. And like I said, we also get some working capital benefits, which are streamlining to our cash flow, and part of the sort of dramatic change in our cash flow comes from efficiencies in the phosphate chain.

Okay. That’s helpful. And just one more on – also on phosphate. In terms of the YPH joint venture, it seems like the past few quarters, I’ve seen in the slide this has been called out, narrow operating profit, good trends there. To what degree of control do you have in terms of that joint venture? I mean what are your expectations for growth in the back half there? Thanks.

Okay. We have a local partner. The partnership has been very, very good. We’re not on our own, so we don’t have complete control. Like any other business, we do have the managing control of the business, which means we do manage the business. The potential in the China phosphate business comes from the fact that we built a strong commodity infrastructure, and we’re building now specialty capabilities with the new white phosphoric plant that will be inaugurated sometime in September, October. And we’ll start sales in the first quarter of next year. At the same time, we’ve developed capabilities to produce and sell specialty fertilizers in China, so that’s also going to be a new source of – new significant source of income from next year. So we finished the first phase, we have some bumps, turn the business to become profitable towards the end of last year, and now it looks like it’s very much in the right direction. Invested in specialty capabilities. And as of next year, we will go to the next level, which means that we’ll start increasing the percentage of specialty products that we sell in China, which is currently relatively negligible.

Our next question comes from the line of Laurence Alexander from Jefferies.

Yes. Hi, this is Nicholas Cecero on for Laurence. Just in terms of some of the exports coming out of China for DAP, MAP and TSP, they’ve been running year-to-date pretty high relative to the past few years. I guess, do you see the pace of exports slowing down in the back half of the year?

We don’t know. But as I answered before, there’s an understanding in China of a cut down of productions. So if that happens, and it’s expected to happen, it also makes a lot of sense because some of the exports are actually being sold at a loss, so I’m not sure if it makes long-term sense anyway. So we do expect some kind of slowdown in exports. But again, that’s just based on our expectation. We have no factual evidence to state that we know that exports are going to slow down. But that is our expectation.

Understood. And then on Slide 12, it looks like, for the quarter, the $9 million headwind on the raw material side of things. I guess, do you expect that to reverse at all?

Can you repeat the question? I didn't hear.

Sorry. On Slide 12, it looks like there was a $9 million headwind on the quarter. I guess do you expect that to reverse itself as we move through the back half of the year?

Yes. because that's sulfur that was taken out of inventory, which is – comes from the beginning of the year. So sulphur was at higher cost. Looking forward, sulphur prices continue to go down, decline. So yes, the answer is yes. Will it be a full turnaround? Probably not. But it will go in the other direction.

Okay. Thank you very much.

Thank you. Next question comes from the line of Patrick Rafaisz from UBS.

It’s Pat and good afternoon, everyone. Two questions, please. The first would be on Industrial Products and flame retardants in particular. You mentioned solid volume gains for brominated products but volume declines for phosphate-based flame retardants. Can you add some color here? What is driving the different dynamics in demand here?

Sure, it’s – on the phosphate side, it's simply a strategic decision for a value over volume strategy, like we implemented in other specialty products. And that actually had worked in two directions. On the one hand, we did get price increases. On the other hand, we did lose volume. So we expect that it will take quite a few months until we get back to the same point of view. But it looks now that the prospects are a little better than we expected because of the new change towards P4 production in China. So the headwinds on P4 production in China could work in our favor and make this process a lot faster than we expected.

Okay, understood. And the second question would be on Polysulphate. You said, I think that was with Q3 last year that investments here were around $50 million last year and you expected them to half in 2019? Is this – that still valid? And can you update us with volumes ramping up on the margins here? Also here, I think Q4 was still negative. And when would you expect that margin to turn positive?

Yes. I guess you’re referring to the loss on the Polysulphate business, which part of the loss, of course, is investment, but it all reflects in the bottom line. Yes, first of all, we're very much – we're very close to our $30 million forecast in the year. We were a little behind on production in the second quarter, we produced about 10% less than we planned. We had some issues with dust in production. We're pretty much through those issues. It looks like we'll be very close to the annual target. And if we're close to the annual target, that means we'll be very close to the financial target. We also had some good news on the marketing and sales side. We found some solutions – some unique solutions to our R&D processes for contraction and granulation of the product, which is being received very, very well in the market. So we're also much more confident in our ability to sell everything we produce, which is, again, good news.

Thanks a lot. Very helpful.

Thank you.

Thank you. We have no further questions, if you wish to continue.

Okay. Thank you everyone for joining us today in this hectic earning days, and we really hope to touch base soon. Have a great day. Bye.

Thank you. Ladies and gentlemen, that does conclude your conference for today. Thank you all for participating, and you may now disconnect.