Ladies and gentlemen, thank you for standing by, and welcome to the ICL Analyst’s Conference Call. Our presentation today will be followed by a question-and-answer session. [Operator Instructions] I must advise 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 of 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 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 the presentation by our CEO, Mr. Raviv Zoller; followed by Mr. Aviram Lahav, our CFO. Following the presentation, we will open the line to the Q&A session. Raviv, please.

Thank you, Peggy, and welcome, everyone. Clearly, a great deal has changed in the world since we have last reported. And I want to try to give you the clearest picture possible of the impact we have seen and expect to see in our business and across our end markets. To begin with Slide 3, while we have benefited from commodity market upside, this has not distracted us from continuing to focus on our long-term specialties operations and on expanding this portion of our business. Commodity cycles come and go, but the upside is subject to external factors beyond our control, and this is why we remain dedicated to our specialty strategy, which will benefit our shareholders in both the near-term and into the future. In the first quarter, ICL delivered record results with all time record sales of more than $2.5 billion, an increase of more than $1 billion and ahead of our expectations. Adjusted EBITDA crossed $1 billion and was also an all time record as we leveraged our agility and diversity despite global uncertainty. Our specialties business, Industrial Products, Phosphate Specialties and Innovative Ag Solutions, all delivered record results, and all four of our divisions contributed to the significant growth in sales and EBITDA. Overall, strong quarterly performance was supported by increased demand in higher prices in most markets as the disruption caused by the pandemic sanctions and the conflict in Ukraine radically shifted market dynamics. During the quarter, we maintained our focus on long-term cash generation by innovating with our specialty businesses product portfolio and by driving cost efficiencies to deliver free cash flow of $218 million, up more than 260%. While it can be easy during an up cycle to lose focus on costs, our initiatives in this area remain on track. We continue to…

Thank you, Raviv, and to all of you joining us today. While you have already seen Slide 13, I would like to call out a few additional highlights. First quarter adjusted operating income of $880 million was up more than 370% and adjusted operating margin of 34.9% was up dramatically from 12.3% in the first quarter of last year. Adjusted net income attributable of $613 million was up more than 350% year-over-year and adjusted diluted earnings per share of $0.48 were up $0.37 or more than 350%. As Raviv mentioned, quite a lot has transpired since reported our fourth quarter earnings. As you can see on Slide 14, while global growth remains strong, inflation in most countries has soared to multi-highs. The U.S. dollar has surged to its highest levels in nearly two decades, which is causing swings for other currencies around the globe. The combination of these dynamics and the situation in Ukraine has had a ripple effect around the world and resulted in even greater uncertainty. As a result, the supply chain disruptions we experienced throughout COVID and into 2022 have not only continued, but conditions have become worse. In addition to issues related to Ukraine, there have also been delays due to resumed COVID restrictions and shutdowns in China. Commodity prices have continued on their upward trajectory and we expect additional impact going forward due to the invasion of Ukraine. For potash in particular, existing sanctions on Belarus have been compounded by international sanctions in Russia, resulting in further tightening of supply since these two countries accounted for approximately 40% of potash supply in 2021. On Slide 15, you can see prices for potash, phosphoric acid and sulfur have continued to trend higher with prices reaching new 10-year record highs. For the first quarter, while we were…

Ladies and gentlemen, this starts the Q&A session. [Operator Instructions] Our first question comes from the line of Alex Jones from Bank of America. Please go ahead, sir.

Thanks very much for taking my questions. Two, if I may. I'll go one-by-one. The first question on the margin in industrial products. Clearly, above 40%, very, very strong. How should we think about that in the balance of the year? Will sort of continued price increases sustain it at that level or will more – will that pressure push it down? Or start pushing it down a little bit. At least I'll start with that and then will come back with more. Thank you.

Okay. Thanks, Alex for the question. The margin came out higher than we expected in the beginning of the year. And the reason is that our long-term contacts have an annual price update and that happens in the beginning of the year. And the pricing came in higher on almost all of our contracts. We expect the margin going forward, not too vary too much from the first quarter.

Thank you. That's clear. And just a second question on the volumes…

Just to make sure I'm accurate. Typically, fourth quarter is a weaker quarter, so could be a little weaker at the end of the year, but don't expect anything different in the next quarter.

Thank you. That's clear. And just a second question on the volumes of that division. You called out in your comments, the number of different drivers, auto consumer electronics wide, there was 11% decline year-over-year this quarter. How should we think about that into the second quarter? And given sort of China COVID lockdowns ongoing, but then into the balance of the year, how do you think about that? Thank you.

Okay. So thanks for that question. I want to point out, if you look at the numbers, it seems like quantities in IP division went down quarter-over-quarter. And what I want to point out is that we shutdown two of our plants in China last year. Those two plants created quantity, but negligible profitability. Also in our third site in China, we had a shutdown for over a month. So that means that the realistic quantities went up, but because of those factors in China, mainly the shutdown of – or rather the sale of one of our sites and the shutdown of the other quantities went down. In terms of quantities going forward, we expect quantities in the second quarter to be similar to the first quarter. Maybe, just a bit less in electronics related, but at the same time, more on clear buying fluids because some orders were postponed to the second quarter. The visibility in the second half is not as high as in the first half yet. And that's very natural. We could see if the situation in China persists and unexpected logistic issues happen as a result of the lockdown that could have an effect. Right now, we're not seeing that in terms of our bookings. And again, most of our businesses is contracted over 70% and it's even higher in China, is contracted annually. So we don't see anything dramatic. But we did want to point out that there could be some effect due to the relative weakness coming about in electronics and automotive. And again, these are a result of the lockdown in China.

Great. Thank you very much.

My mic is on. So [indiscernible] potentially in China because it's a significant part of the division is the shipments might come in later. On a quarterly basis, there can be some delays because China – the ports in China, there's a massive lockdown going on these days, depends how it will go about. If it makes sense to you, I think it's a general issue that prevails there. I think that over time, this must be resolved, but at least in Q2, by the way, it can be – the things will be playing between the quarter that's just an effect of the shipping itself.

We have another question coming from the line of Geoff Haire from UBS. Please go ahead with your question.

Actually my question has been answered previously. So I don’t need to ask it. Thank you.

Thank you. We have another question and it comes from the line of Joel Jackson from BMO Capital. Please go ahead with your question.

Hi, good afternoon. You don't get off that easy with me. I want to talk about potash, obviously. Maybe I could start off with a high level question, gentlemen. If I look at your EBITDA, expected EBITDA range midpoint – sorry, for 2022, it's a $2 billion increase for 2022. Can you bridge that? How much of the $2 billion of EBITDA increase in 2022 would come from potash price? How much would come from other businesses. Can you break down that bridge as granular as possible for your business please?

You mean just the Delta?

Yes. The delta, the $2 billion delta from 2021 to 2022. How much of that is potash priced? How much of that is other things and other businesses as much as granular as possible would be very helpful.

All right. So you can see we have a number for the specialties business, right? So the specialties accounts for about 300 and some at the midpoint and the rest is about, 75% potash and 25% phosphate to give better sense, to give a little more, I mean, Q2, obviously potash prices are going to be higher than Q1. First half sales are already behind us, so we already know the numbers for first half. And for the second half of the year, we have higher prices for potash in the third quarter, but the third quarter is not sold out yet. So we took conservative numbers for the third and fourth quarter on potash. The average selling price in the second quarter for potash is expected to be around the $800.

Okay. So that's very helpful.

$800 is the number before transport costs. So the realized price will be around $760-ish.

Thank you. So if I do that math, it sounds like 60% to 65% of the 2022 EBITDA delta is potash price?

That's pretty accurate, yes.

Bit less.

Okay. So then my next question would be, so these potash prices obviously, we're seeing a lot of peers talk about demand destruction and price is not going higher or lower. What is your view right now on price here, demand here? Has the price hit the right level now to balance demand versus missing Byelorussian tons? Do you think we're going to see some softness? What are your views on where the market goes next in potash?

Okay. So there's a short-term and there's a long-term. In the short-term, the basic facts are that there's lack of supply in the market. There's over 2 million tons of potash missing for Brazil. Brazil has to have the potash because the type of land that is there in Brazil, demands potash that they can't skip a season or something. There will be some demand destruction in Europe, some in Europe will skip a season. That means that potash deliveries for this year will be lower. It will be lower – it maybe lower in the States as well. In the short-term that doesn't do too much because again, the market is undersupplied. For the short run, it's actually a better news for stability for prices because anybody that skips a season, this season will need more potash next year. So that means that once, market comes back and maybe if sanctions are lifted and product comes back, there'll be more demand for potash next year. So in terms of potash dynamics, there will be demand disruption, there’s quite a lot of uncertainty yet in terms of decisions to be made by distributors and farmers. There was a lot of destocking, so stock levels are low. In China and India and even in Brazil, they're getting lower by the day now. And in the U.S. because of the wet season, there wasn't as much application of potash this season. So there was some softness in the U.S., but I expect that to change towards the fall season. So I think demand will be healthy enough to sustain these existing prices. It's difficult to speak about the higher prices because these are uncharted waters. We've never been here before. We can say that there is demand that's not going to get…

Maybe just a note of if that India and China together, they comprise below 30% of the total potash sales for ICL in a year. So in the latter part of the deal, the spot prices can be quite beneficial to ICL, if they continue to sustain, obviously.

Joel, that's the best we can do for now.

Okay. Joel, you might be on mute. Can you unmute yourself? We are moving to the follow-up question and the question comes from the line of Laurence Alexander from Jeffries. Please go ahead with your question?

Hi. Good morning or good afternoon. Just wanted to get your thoughts on the M&A landscape given how well your cash generation is doing and how poorly tech valuations are doing. So are you seeing different kinds of opportunities or are you changing the types of companies in your M&A pipeline?

That's a fantastic question. We've been a little frustrated in the past year, year and a half because we're looking at M&A opportunities and we're excited to grow our business. And at the same time, evaluations have been a little crazy, hopefully if there's – I mean, I'm not hoping that the markets go down, don't get me wrong, but if valuations rationalize then definitely that creates more opportunity for us. We want to have and we do have the liquidity and we're generating plenty of cash and we're going to be generating even more cash. So we want to be opportunistic. We have our eyes on a few interesting targets and we hope to be able to do more in terms of M&A in the next couple years than we did in the past couple of years.

And for Innovative Ag Solutions, what do you see as the normalized run rate? Because kind of the underlying improvement in that segment is a little bit harder to track with the fly up you're seeing?

Yes. For this year, we're going to see a very nice growth – the growth that you saw in first quarter is going to continue for the rest of the year. The growth in Brazil is phenomenal, so much stronger than it was last year. I do also want to point out, like I pointed out in the IP division, that if you look at the IAS results, it would seem that quantities actually went down. When you put the Brazil on the side and look at the rest of the business, it looks like quantities actually went down a bit. And that, again, doesn't tell the right story because of two issues. One in Aviram's remarks, he mentioned the fire we had in our facility in Germany towards the end of last year. And that facility was not working the whole first quarter. So the quantities that typically come in Europe from that site, we’re not there in the first quarter. And of course, that's going to change for the next three quarters. The other thing is that in Boulby in order to reach our targets for polysulphate production, we took down salt production, which is low value and does not do anything for our P&L, but we took down production by 65,000 tons. And those two issues, the facility in Germany and [indiscernible], took the quantities of the division down, but those of course are one-time events that will not stay with us. So all-in-all, the growth in the legacy business of IAS has been around 20% and the growth in Brazil, even more than that. And it's also a growth with growing margins. So we see margin expansion as we grow, which is also very nice. Will we continue to see margin expansion? Again, that depends on what happens to overall fertilizer prices. So I'd rather be conservative and not project that, but we see very nice margins. We had the low single-digits in this business just two years ago, and now we're getting to high double-digits and it's nice to see that. Thanks for the question.

Just one clarification, if I may is, how do you think about mid-cycle EBITDA for the business – for your specialty businesses? If the current conditions sort of normalizing 2, 4, 5, however many years, I mean, just what do you see as the mid cycle kind of benchmark?

So mid-cycle for IP business would be above 30%, we saw significantly above 30%, but mid-cycle, I would say, at the minimum more than 30%. We had that in the past. The reason is we're a market leader, we're a price leader. So that business is very solid and safe. In IAS business, we're targeting, as we presented in our long-term plan, we're targeting 15% plus. And in our phosphate business mid-cycle, we're also targeting above 10%. But again, phosphate plus 10%, is when our commodities business is making close to zero. So on our specialty phosphate business, we're targeting plus 17%. That's the number that we had in our long-term plan.

Okay. Great. Thank you very much.

Thank you.

Our next question comes from the line of Vincent Andrews from Morgan Stanley. Please go ahead with your question.

Hi, guys. This is Will Tang on for Vincent. Thanks for taking my question. Now that I feel Boulby has turned to profit kind of given the higher prices in production. Can you talk about what your expectations for the business are for the rest of the year? And I guess whether we can expect it to continue turning the profit long-term from [indiscernible]?

Yes. So we got to 238,000 tons of production in the first quarter, which is a run rate of about 1 million tons. So we expect that to be relatively stable for the rest of the year and end up the year at about 1 million tons. In terms of pricing, pricing went up from about $115 in the first quarter of last year to $210. The first quarter of this year, it has to do with commodities, but much more than that, it has to do with the positioning of the product. We call the product – we branded the line of product as Polysulphate FertilizerpluS. The product is an organic product that has some potash, a lot of sulfur and micronutrients such as magnesium and calcium. And the positioning is that it's a high quality organic fertilizer with no chemical process involved and the reliability of the product is high. The results are very good. And looking forward, we expect that the premium that some markets will pay will be higher due to the organic certification that we have now both from the EU and from the U.S. And the growing appreciation to the results of the product that we're selling took us between three to four years to penetrate markets. And now that we have – we expect to maintain our profitability, maybe even grow at the second half of the year as long as no dramatic changes happen. And we feel that over time, we will build additional premium because of two reasons. One, because of the positioning of the product is a high value organic product. And second, because we're developing a whole line of product that involves combinations of polysulphate with other nutrients granulated products that create better use efficiency for plants. And those additional products that we're developing under the brand are being accepted very, very well. And each one that comes out and proves its successful value gets us more premium. So the product portfolio success together with acceptability of the branding is going to give us additional premium and higher prices in the future that will enable us to grow our margin. Hope that answers.

Got it. Yes. Thank you. And then I guess, just as a follow-up between last quarter and now you've kind of almost doubled your earnings expectations for 2022. I know you talked – you briefly touched on M&A a little bit, but could you give us a run through again about how you're thinking about, I guess, allocating that access capital that maybe you weren't expecting a few months ago?

So again, remember you said, we doubled and we already said that almost two-thirds of that is coming from potash prices. Remember that when we modeled in the beginning of the year, we explained our conservative guidance. We were at the time selling potash at $249 in China, and $440 or so in India. And just that China prices went to $590, which is well over a 100%. And of course, Brazil prices went from around $650, $700 at the time that we put together our original model to currently about $1,200 per ton. So it's pretty straightforward why that's changed. Again, we're sold out for the second quarter. So I gave the number of about $760 realized price for the second quarter. In terms of second half visibility is still too early because although like Aviram mentioned, one-third of our product is already sold at $590 to China. And in India, we don't expect that to change. The rest of the sales really depend on developments in the market in terms of prices and who knows what's going to happen in terms of the situation in Ukraine and potentially, the food inflation causing the world hunger. There's too much volatility out there to give an accurate projection at this point.

Just said that potash, of course, is the dominant factor and phosphate is also very considerably between the time that we estimated and what we see now. It's also about $400 million in operating income terms. So that's another significant factor. You put those together with the IP side and some on the IAS side, and you get the different and that bridge is for you. Logically what happened in the first estimate and what we see now.

And then I guess, as a follow-up to that, could you kind of talk about how you're thinking about allocating in excess cash that you guys are expecting to generate?

Well, we're paying out $306 million as a dividend, which is pretty much the net cash generation, the free cash flow generation this quarter. Looking forward to the rest of the year, we're going to generate a significant amount of additional cash. And we're considering M&A opportunities as well as having enough reserves to be able to protect our position or better our position in terms of the interests we have with the government concession and other issues that where we could be opportunistic to take care of – to take advantage of these very good times that we're going through in order to better our long-term situation.

Maybe just one comment, if I may, on capital location. The working capital side, as we grow our business in Brazil, it demands more capital than most probably most of the rest of the world. Receivable terms are longer, especially around receivable, trading terms are longer. The margins are very nice, but we have to allocate some working capital to Brazil as well. Anybody that works there, it's a well known fact.

Got it. Thank you.

And we have a follow-up question coming from the line of Joel Jackson from BMO Capital. Please go ahead.

Hi. I got cut off at the end there. I appreciate your color on polysulphate. So I have two questions on that. If you think the $215 a ton selling price, can you somehow in your mind come up with how you divide the value that a customer's paying at, say $215, between potassium, sulfur, calcium, non-chloride, organic, like, is there, how does your marketing team think of the value the customer gets $215 among all those different buckets. Does that make sense when asking?

It's a good question. I would say, look the potash component is 14%. So I think it'll take a long time until we get more than the potash value for those 14%. The rest is coming from the combination of the nutrients and their effect the results that they yield. So as the results become clear and as we go from one season to the next, our position improves, because if you get higher yields, then you're not going to pay a 100% of the higher yields because you're not confident yet that the result is going to repeat itself. So I think we'll have to – we'll need to have repetitive good results with our customers to build the premium. And again, the combination of nutrients is not just the nutrients embedded in the polysulphate, but we're also creating now additional products that combine polysulphate with other nutrients in order to increase the combined value. And again, some of those products are being accepted very well, including, PKs and NPKs with polysulphate.

Okay. So now I'm going to ask this question a bit different. It's going to sound like Debbie Downer, so I apologize, but I'm being honest. So you got the million ton production run rate, and you're at the highest commodity prices ever. Potash prices cannot go higher. Sulfur prices cannot go higher. Let's just say, or as high as they've been, and you're just barely turning a profit on this product now over a decade into it, is that not a sign? Because commodity price are going to be cycle are going to go in cycles. They're going to go down. Is that not a sign that this business is never going to be anything other than really just round break even, and that might encourage why nobody should build any more capacity of this product, you or anybody else?

Okay. So first of all, it's a very fair question. We're not 10 years into this product. We're four years into this product. The mine used to be a potash mine and we're building our Polysulphate business in the last four years or so. The reality is that, it may not be a high margin business on its own, but the given the results that we have so far, we know that in combination with other nutrients, we get some tremendous results. And again, this is for very specific types of land and markets. So does the fact that we think that we can make it a profitable business and we can command just as good pricing in commodity down cycles because yes, the embedded value of the potash will go down, but the premium and the acceptance will go up. Does that mean that it's a multimillion ton market? The answer is no. We think that the world needs one or two million tons. It doesn't need more than that. In order for somebody to sell more than that, they'll have to make a call, what their assessment of the market is. Our assessment of the market is that we are nicely sized for a niche market, if you will, that's why we're treating it as a specialties market. As a specialties product is going to be sold as a specialties market. It has service around it. It has logistics around it. We don't think that it can be profitable selling as a commodity business and competing with SOP or other type products. So the short answer is, yes, it's not easy to get to where we want to get. We're very happy that we're making money instead of losing money. At this capacity and given our proven success with the product, we don't think that it'll be a bleeding business that will take us back anymore. But at the same time, we still have a long way to go to get to the premiums that we want and get to the long-term stability that we feel safe about making a nice margin in this business.

Thank you for all that color.

You're welcome. Thanks for the question.

Thank you. We have no further question at this point. I hand the conference back to you.

Okay. So before I hand it over to Peggy, I just wanted to thank Dudi, who's been with us for a few years and he is moving to his next assignment. And we wish to thank him for years of great work on IR in ICL. Congratulations on your new job and lots of success. And we hope you continue to be proud of us on what we are doing. And I will turn it over to Peggy.

Thanks, Raviv, and we will speak with you again next quarter.

Ladies and gentlemen, this concludes today’s conference call. You may now disconnect your line. Once again, thank you for your participation today.