Ladies and gentlemen, thank you for standing by and welcome to the ICL Analyst Conference Call. [Operator Instructions]. I must remind you that this call is being recorded today. [Operator Instructions]. I'd like to hand the call over to the first speaker today, Peggy Reilly Tharp, Vice President, Global Investor Relations. Please go ahead, ma'am.

Thank you. Hello, everyone. I'm Peggy Reilly 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 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 information discussed on the call at any time. We will begin with the 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.

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 3, we delivered our fourth consecutive quarter of bottom line improvement. A strong performance was supported by increased demand and higher prices in most markets. We also worked to overcome higher overall costs and global supply chain challenges during the whole quarter. All 4 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 4, and as you can see, once again we demonstrated improvement in each key financial parameter. On Slide 5, 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 4 businesses on Slide 6 contributed to our third quarter success, and together we were able to break an 8-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 2 recent acquisitions in Brazil. As a matter of fact, our…

Thank you, Raviv, and to all of you for joining us today as we report another outstanding quarter. While you have already seen Slide 14, I would like to call out just a few additional highlights. Sales of nearly $1.8 billion were up approximately 50% year-over-year. Our EBITDA was up nearly 90%, and our EBITDA margin of 23.5% was up nearly 500 basis points. Adjusted diluted earnings per share of $0.17 was up $0.12 or approximately 270%. Operating cash flow of $273 million was up $70 million over the third quarter of last year and more than $30 million from the second quarter of this year. We have seen good cash flow contribution from each of our business segments with industrial products delivering record cash flow this quarter. In the third quarter, our results continue to be driven by our specialty businesses, and as we also benefited from commodity upside. If we look at our commodity potash business on Slide 15, you can see that while there was a significant year-over-year improvement in sales and average realized price per ton, we are actually in line with the year-to-date potash prices of 2019, a year we characterized as mid-cycle. And for EBITDA, we still have room to grow to reach 2019 rates, mainly due to higher logistic cost, currency headwinds and our consolidation work in Spain. We expect to see additional upside from recent high potash prices to flow through in the fourth quarter and into 2022. There is still room for additional industry upside as prices are still below levels seen in 2008 and 2009. On Slide 16, you can see that potash isn't the only commodity reaching recent record high prices. While many prices are reaching rates not seen for 10 years, the acceleration of marine transportation cost is…

As we announced last month, Kobi is leaving ICL. And on behalf of the entire company, I want to thank him for his service and wish him the very best. Kobi is opening a new and happy chapter in his personal life, and I know he and his family will be blessed together. Thank you, Kobi, for all your hard work and dedication over the past 6 years. It has been a pleasure working with you. I would also like to take this opportunity to welcome Aviram Lahav as the new CFO of ICL. Aviram brings more than 20 years of diverse experience from his former roles as both the CEO and CFO of Veris Global Company, including most recently as CFO of ADAMA. Aviram has extensive familiarity with both the Brazilian and Chinese markets, and we look forward to tapping into this experience. Thanks to Kobi's guidance, Aviram is inheriting a strong financial organization, which I expect will continue to support our business growth as the value of ICL continues to increase. And with that, I would like to turn the call back over to the operator for Q&A.

[Operator Instructions]. Your first question comes from the line of Alex Jones of BoA.

Two please. The first one is just around the full year guidance, I guess, on sort of EBITDA level it implies a slight deceleration in the midpoint quarter-on-quarter. Could you discuss the moving parts there, especially given you highlighted in the potash division improving, the price environment is improving sequentially? And then the second question specifically on bromine volumes, obviously, down slightly versus 2019 levels this quarter whereas last quarter you were up 12%, if I remember correctly. You mentioned an impact of maintenance. If you could help us sort of quantify that. But otherwise, is this a sort of sustainable run rate we should expect growth to be in this division until those new isotanks come in the second half of 2022? Is there anything else to think about that?

Alex, thanks for your questions. So in terms of fourth quarter versus third quarter, then if you look historically, fourth quarter is a weaker quarter in the divisions other than potash, which means that typically the industrial product sector is lower in the fourth quarter, as well as the Phosphate Solutions division and Innovative Ag Solutions, the latter 2 because of seasonality and the bromine business, mostly because of end of year and the contract relationships, which get renewed in January, but sometimes deliveries get pushed from the holiday season into January. Specifically this year, on the industrial product side, because we're -- because we're at full capacity and because of the dynamics of this year, the fourth quarter is going to be very similar to the third quarter, maybe just to lead it less. The production -- the maintenance in the third quarter meant that specifically the third quarter had lower production of 10 days of maintenance at our Neot Hovav facility. So the production was a little lower in terms of quantities. And some of that spilled into the fourth quarter, a small portion. So a typical quarter would be stronger than the third quarter because of that and that means that when we enter next year, we're going to start the first quarter with a higher production level and also with higher prices because of the renewals of new contracts were going to be prices that reflect some of the elevation in bromine prices in recent months that don't come in online into the contracts. So bromine for fourth quarter somewhat similar to third quarter next year, higher than third quarter in the second half of the year, better because of new production capacity. Phosphate division and Innovative Ag Solutions division are going to be softer in…

Yes. That's very helpful.

Your next question comes from the line of Joel Jackson of BMO Capital Markets.

This is Alex Chen on for Joel Jackson. I have 2, if I may. Just to follow up on your potash comments. Looking at the benchmark prices in Brazil currently around $800 a ton, is ICL booking any meaningful volumes at these benchmark prices for a few months out, maybe you can comment a bit on your color book and what you see for Q1 and -- Q4 and Q1 versus benchmark prices?

The recent sales in Brazil were a few thousand here, a few thousand there. The largest business that we signed at around $800 was about [indiscernible], if I'm not mistaken, was about 40,000 tons. The market in Brazil currently is off-season. So that's actually more than we would typically sell in any given year. I hope that helps. Usually, the market in Brazil from our perspective is relatively dormant in the first -- in the last quarter and the beginning of the first quarter. So we've sold more this year in Brazil than last year, for example.

Yes. That helps. And just one more question on the bromine markets. We're seeing volumes constrained from raw materials and produced from producers. How much visibility does Brazil have into this? Maybe you can give a bit of color on what you think the dynamic will be like for ICL in the first half of 2022.

Okay. So there was some force majeure in the industry, mainly around chlorine. That's not an issue for us. We produce our own chlorine, so we don't expect anything in the near future that will hamper our efforts to produce the capacity production that we need.

And your next question comes from the line of Mubasher Chaudhry of Citi.

Just a couple of comments around the overall potash and phosphate demand. And then kind of there has been some chatter around some of your competitors thinking overall on the earnings calls, thinking about farmers potentially curtailing or reducing their purchases as they try and prioritize nitrogen purchases. Just some thought around what you're seeing and what your views on that might be helpful. And then secondly, on the chlorine, has that resulted in higher volumes from yourselves and are you operating in kind of geographically to the region to be able to take for market share, some things that would be helpful too.

Okay. So I'll start from the latter question. Regarding chlorine, no, that's not -- it's not an issue for us. Like I said, chlorine, we produce for ourselves. And it's not geographically-based. There was some chlorine force majeure mainly in the U.S., so that's not affecting us. Unfortunately, for us, although there was demand for additional capacity, we could not produce the additional capacity. So we may have lost an opportunity here. But unfortunately, we're fully booked. So that's regarding that. It has, of course, affected the market prices, including for contract renewals. So just from basic physics we are -- our new contracts are being signed at higher prices, and there will be a price effect in 2022. But we didn't take on additional quantities because we don't have the capacity to take on additional capacity until mid-2022. Let's get back to the dynamics of phosphate and potash. So first of all, we need to recognize that this year, there's politics coming into the market and politics have to do with food security and other sustainability and other issues that cause governments to interfere. And some of the interference is causing a ban on exports in China, now also in Russia. Phosphate market is currently very much undersupplied to an extent that there's -- there are difficulties with farmers getting some of the product they need. And if you're following the situation in India, then prices are going up, the government is lagging in terms of providing the necessary subsidy to protect farmers. That, of course, affects food availability, and that becomes a political issue. Other politics concern, climate change obviously, American and European politics on that, the effect on gas prices and oil prices, and also sanctions or political sanctions affecting the potential supply of potash from Byelorussia.…

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

This is Will Tang on for Vincent. So on your press release you mentioned about limited local supply for bromine out of China. Is that a function of kind of the dual control mandate limiting production? And if so, what is the magnitude of production that's been impacted? And then, I guess, more broadly, could you just comment on the local supply situation there?

Could you please just repeat the first part of your question because I couldn't hear?

Yes, sorry. You guys mentioned limited local supply for bromine in China. Is that a function of the dual control mandate? And then if so, what is the magnitude of production that's kind of been impacted by that?

Okay. So there are 2 combined elements here. One element is that there's a reduction of capacity that comes from a depleting resource. And that's happening at about 4%, 5% a year. And then there are shutdowns that are coming from regulatory scrutiny and environmental issues. So I don't remember the exact numbers, but you can definitely get in touch with us, and we'll be happy to supply.

Got it. And then I guess just one more question, if I could. Could you remind us what the path to profitability looks like for polysulphate? I think last quarter you mentioned that you guys had a headwind due to booking sales at lower prices and then kind of freight rates moving against you. Would the opposite be true, like, if freight rates kind of move back to normalized levels and you guys see profitability earlier than previously expected?

The short answer is yes. This was the first quarter in which we actually sold more polysulphate than they produced, which is a very good sign. We actually didn't produce as much as we wanted. We came up a little bit short, but we still sold more. The premium also went up. Unfortunately, transportation costs also went up. So that doesn't help, but the market is accepting our products. And also in October for the first time ever, we crossed the million ton run rate for poly. So that's also a milestone we look for. So all in all, the poly business looks like it's shaping up to be in a better place.

And your next question comes from the line of Anne de Place of Burgundy.

Raviv, congratulations on the great results. My question was around bromine and just a bit longer term. Can you talk a little longer term to sort of what you see on supply and demand?

Okay. So first of all, I don't answer them before. So I got the details that I needed. Two years ago, the Chinese market was producing about 65,000 tons, and it's down to less than 50,000 tons now. So it's been going down by more than 5%. In the long term, the bromine industry is not a prioritized industry in China. And that means that slowly but surely, much of the compound business is flowing out of China, and most of it is coming to us. So I think that the reduction in production of compounds is to some significant extent depends on how aggressive we'll be and growing our capacity. It makes a lot of sense because we have the bromine available on hand. We don't depend on anybody else. And we're reliable, we are a reliable producer. As we sign more long-term contracts, the meaning of them is that the compound production is transferring over to our facilities. What I can say for the long term is that we are pretty far ahead of our 5-year plan that we presented. So once we're ready, then we'll present an updated plan with more ambitious -- with more ambitious results. Hope that helps.

Yes.

[Operator Instructions]. Your next question comes from the line of Geoff Haire of UBS.

I just have 2 questions. Firstly, I was wondering, are you getting any inquiries about using phosphate for LFP production from outside China? And the second question is, can you update us on what the status is for the renewal of the 2023 concession in the Dead Sea, please?

The Dead Sea concession is 2030.

2030, sorry.

Yes, it's still far away. There's been no major development in terms of the concession. Israel in the past 2 years was busy with elections, recurring elections. And just, I think today the government approved the first budget in 3 years. And I think in terms of the priority list, they have some other things to deal with, but we are in touch with government officials. And I think it's more a concern on their side than it is on our side. So I'm sure that in the coming few years, there will be progress on the concession. But what was the first question, I'm sorry, but --

The question was...

[indiscernible] outside of China?

Yes.

Yes. Yes. We based on our business in China and our announcement, we are getting plenty of inquiries, but it's not just from LFP producers. It's from our technology partners. We're definitely looking to go up the value chain. So we're getting inquiries from potential cathode producers and from technology innovators, and we are spending time and we intend to spend some R&D resources into leveraging the opportunity, which we're very, very excited about.

Your final question comes from the line of Laurence Alexander of Jefferies.

This is [Mary Melinda] for Laurence Alexander. I just have one question. Can you give a bit more color on your magnesium comment with this recent price line up? Can you take advantage of it now or in 2022 and how meaningful it will be for your top or bottom line?

Yes, sure. There was a spike in magnesium prices due to the electricity issues -- and coal/electricity issues in China. So prices spiked from about $2,500 to about $10,000 per ton in the recent months, and we took the opportunity in order to contract a significant portion of next year's contracts magnesium. Contrary to what we had 2 years ago, we had -- we were busy with claim in the U.S. and we're not able to contract on time for the 2020 year. And right now it's exactly the reverse. So we're entering 2022 in a good shape on magnesium. Magnesium is typically not a profitable business for us. It's result of production of bromine and potash. And in 2022, it's going to be a profitable business for us because of that spike in prices.

There are no further questions on the line. Please continue.

We'd like to thank you all for joining us today, and we will speak with you again when we report our fourth quarter results. Have a good day.