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

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 it's available on our website. Please be sure to review the disclaimer on Slide 2. Our comments today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are not guarantees of future performance. The company undertakes no obligation to update any financial information discussed on this call at any time. We will begin with a presentation by our CEO, Mr. Raviv Zoller, followed by Mr. Aviram Lahav, our CFO. Following the presentation, we will open the line for the Q&A session. Raviv, please.

Thanks, Peggy, and welcome everyone. I'd like to begin by recognizing all the expressions of concern we've received since October 7. In addition to hearing from you, our investors, we've also heard from our customers, suppliers, competitor; there's so many others. These heartfelt messages are greatly appreciated as we navigate the current situation in Israel. While we’ll provide more detail later in this call, I would like to assure you that while there are some challenges, our operations in Israel continue without significant disruption. For the third quarter, you can see a quick overview of results on Slide 3. Sales of $1.86 billion we're flat sequentially as we saw the beginning signs of stabilization in many of our end-markets. Adjusted EBITDA of $346 million was down versus the prior record year, as expected. During the quarter, we completed significant destocking efforts, which in part helped contribute to our strong cash generation. For the third quarter, we generated more than $400 million of operating cash flow and $217 million of free cash flow. We delivered $0.11 of earnings per share and distributed nearly $70 million in dividends to our shareholders as part of our long standing policy to payout 50% of adjusted net income each quarter. While we'll discuss each of our businesses in detail, I would like to call out our strong putout deliveries in the third quarter, and we are now sold out for the year. For our phosphate specialties, we had another solid quarter and they're in the process of board approvals for the first off-take agreement for our new battery materials facility, which is now under construction in St. Louis. I would ask you to now turn to Slide 4, and the three year look at our key financial metrics. While sales were down year-over-year, as expected,…

Thank you, Raviv, and all of you for joining us today. Let us get started on Slide 12, where you will see some very familiar external macro pressures. While many of these remain unchanged from the beginning of this year, as Raviv just discussed, the war in Israel, which began in the fourth quarter brings additional geopolitical issues, both inflation rates and interest rates have moderated but remain mixed on a global basis. Overall, global growth remains subdued, and the economic recovery in China has been weaker than expected. From an agricultural perspective, grain prices are levelling off, and fertilizer prices have stabilized. On Slide 13, you can see some of the trends I just discussed. While inflation rates are generally trending down, they remain persistently elevated on historical basis as do interest rates. And on Slide 14, you can see the trends in grains and fertilizer prices. On Slide 15, you can see the expected trend for electric vehicles over roughly the next decade. As Raviv mentioned, there has been a great deal of noise about EVs lately, but as you can see, the rate of growth has always been expected to be gradual. Electric vehicles sales are on-track with 9% of all cars sold in the U.S. by the end of this year; that's a 50% year-over-year increase, and it is the second year in a row that EV sales have surged by that amount. The LFP battery materials we will be producing at our facility in St. Louis will be used not only in electrical vehicles, but also by the energy storage industry. It is important to remember that renewable energy needs to be captured and stored for use by EVs and in other applications, and the investments we are making today will help advance such efforts.…

Thank you. [Operator Instructions] Our first question today comes from the line of Alexandria Jones of Bank of America. Please go ahead.

Great. Thank you very much for taking my questions. Two, if I may, just to follow-up on a couple of comments you made, Raviv. The first one on battery materials; you talked about the first customer contract or partnership that's nearing completion. Could you give us a little bit of an idea, the sort of criteria you're looking for when signing contracts with customers in terms of volume commitments or returns or margin levels or technology commitments? That would be really helpful. And then the second one, just on industrial [ph] products; you made a comment that demand is slowly picking up in Q4 so far. Could you expand a little bit on that in terms of different end-markets you might be seeing that in or the magnitude of that so far? Thank you.

Okay, sure. Thanks, Alex. First of all, for battery materials, as you know, our plant is for 30,000 tons. And we'll be ready to start supplying towards the second half of 2025. We're looking for customers that are either automakers, battery makers, or somewhere in between; and we were negotiating with quite a few potential customers. Some of the negotiations are closer than others, some would take quite some more time, so we can qualify and meet expectations. We're talking about potential customers for a few thousand tons each, and the reason we mentioned is that because we have the first agreement come to fruition and subject to Board approval of both sides during the coming days, we should be able to announce in a few days. So that's where we are on battery materials, again, 30,000 tons in total. We expect the facility can serve no more than two or three customers. And in the next few months, we expect to be able to discuss more than one customer. So that's on that. On industrial products; we're talking about demand for electronics, construction is still -- it's still away from us. And I think the reason that we're seeing in electronics is that there is a level of demand that is lower or slower than usual, but all the inventory and the supply chain is gone now; so we can actually feel the demand that exists. And that means that volumes are going up now, and it would continue to go up in the coming months. And as we know, we have long-term contracts; so that means that when we want to increase the volume we can and that's what we're doing these days. In terms of how fast the recovery will be? We think it will take quite some time because there's yet to be seen robust demand for electronics, even electric vehicles demand is a little slower than was expected at this point. And also, artificial intelligence, which is the next wave is not something that we can feel at this minute, and we're talking about increased demand for servers. And of course, construction; construction related flame retardants is much farther away. So we see some of the demand recovery that we're seeing is because of the supply chain that is now not full of inventory. And additional demand will come from the market once interest rates start going down, hopefully. I hope that answers.

Thank you. Our next question today comes from the line of Ben [ph] of Barclays. Please go ahead.

Yes, good afternoon, evening to you guys. And thank you very much for taking my question. So -- also, just two quick follow-ups. One, to begin with -- on the Growing Solutions piece and you've talked about the de-stocking being significantly completed. Clearly, there was still -- it seems there was still an impact in the third quarter. So help us understand like, how should we think about the fourth quarter? And then maybe looking into the first quarter of 2024, just as it relates to the match of demand? Or like actual demand versus what the supply is going to be; how do you think about the cadence here? And what's like kind of a normalized level of profitability you expect in that segment, particularly given the volatility we tend to get out of Brazil? That would be my first question.

All right. Thanks, Ben. In terms of what we're seeing in Growing Solutions, de-stocking is materially over. And what that means is that we're going to see normalized margin, which is more like 2021 margin, going into 2023; we're already growing volume. We grew volume in Q3, even versus last year. So we expect growth of volume and better margin given higher prices and no need for de-stocking. In Q3, we came in actually a little lower on EBITDA than we expected, and I think we'll see the same in Q4. Some of that has to do with internal planning, as some of the potash that we were going to supply internally to help promote some of our blends we're going to need for external customers which means that some of the profitability that we expected in Q3 and Q4, we're not going to lose, but we're going to see if it can be potash sector. But coming for coming first quarter of 2024, we're going to see normalized profitability as we did in 2021. Of course, 2022 doesn't measure up to anything that we know. Hope that answers.

Ben, just a moment -- this is Aviram. I guess one thing taking too high without taking into account that this is agriculture, and the seasonality part of it. So actually, Brazil will be still a very strong quarter, seasonally, but less so than Q1, and Q3; sorry. And the northern hemisphere has not yet started the season. So, they have to take when you asked about Q4 that this also do count when you look at one solution to be basic level culture agriculture.

Okay, perfect. And then actually one follow-up for you, Aviram; just on like, capital allocation; how should we think about it? You’ve talked about the dividend, and obviously, what the CapEx. Cash flow was actually pretty strong still at roughly $1.2 billion on a year-to-date basis. So how should we think about the priorities; M&A versus CapEx, Aviram Lahav, dividends/buybacks What's like the kind of order and where would you like to do more?

Okay, that's a very broad question. I’m -- probably Raviv would want to chip in, especially on the M&A side. But I will say the following; We are generating very significant operating cash flow and it translates into very healthy for free cash flow as well. Part of it is destocking and part of it -- the Working Capital has gone down and another element is that we're really, really operating the company very closely. And we've got a savings plans and it's all coming together into I believe this is a very healthy cash flow you calculate with our capabilities, which we also note in the market. Basically, cash is not a barrier to doing an M&A transaction. So before M&A, I'll address it in a minute, we are really continuing to do everything we can internally, in order to translate the performance on the P&L. The best cash flow we can get -- 2023 is not an easy one; 2024, we have quite a lot of challenges as the whole industry has. But hopefully, we will be able to translate into a healthy financial outlook, let's say cash flow results. With regards to M&A; in the end of M&A, there is a capability to do it as long as we need to have relevant strategic targets that we want. And it's -- we're not buying and we said this, often times; we're not buying top line, we're not buying EBITDA. What we're buying is, if we go, we're trying to expand the horizon of the company, follow the strategy to go specifically -- on the specialty side of our businesses, and opportunities as they come. I think Raviv said this in his opening remarks that we are making the M&A team even more robust with a top notch manager that heads it, and we're looking for opportunities. When it becomes relevant, we will not have finances a barrier to do these M&A transactions. Raviv, do you want to add something to that?

Just to remind everybody that we have dividend policy that's been working well for us, which is distribution of 50% of our adjusted earnings every quarter, and our investors are seeing nice dividend return. And that still gives us ample cash to go through a transaction that -- for any transaction more or less that we need. We were actually close to an M&A pretty lately, that didn't go through because of valuation. And once again, we showed discipline given at the end of the day we want to make sure that we do the right transaction. We don't think that share buyback is the right use for cash in a company that's targeting growth. We've also seen our competitors acquire shares at very, very high valuations. So we may be closer than we were in the past but we're not close yet to actually approve in such a program unless we see that it takes us a lot more time to go through the M&A that we've planned. M&A has first priority before other things. Also, I believe that Aviram did mention that in terms of CapEx, we expect CapEx to be more or less in line with 2023. There'll be somewhat of an addition because of our LFP [ph] plant which is an important venture for the company's future, for our growth; so that's going to require another $100 million or so next year. So we expect the next year's CapEx to be circle [ph] $100 million more than the CapEx this year. And again, it’s targeting LFP [ph].

Thank you. [Operator Instructions] Our next question today comes from the line of Joel Jackson of BMO. Please go ahead.

Hey everyone, this is Joseph [ph] on for Joel. So first of all, we just wanted to say we are shocked by all the events over the last month and hope that everyone at ICL is doing okay. So with that said, for my first question, could you guys just please rank the outlook for the different major potash markets? And how are those views compared to your thoughts, maybe three years ago? And also what are your initial thoughts on global demand for 2024 relative to 2023?

Okay. So first of all, thanks for your kind words, we appreciate it; your support means a lot. In terms of potash market, currently we're expecting demand next year to be around 68 million to 69 million tons following about 60 million to 61 million tons last year, and about 64 million to 65 million tons this year. In general, inventories are low in most regions, and there is a need for replenishment of inventory. Chinese inventory is relatively -- I wouldn't say high, but it's not low but at the same time, there's a lot of demand coming out of China; so there's a healthy environment for next year as well. As you know, prices have stabilized and demand is as strong, we’re sold out for the year, of course, like I think everybody else. And we see strong demand in Brazil, strong demand and even rising prices in the U.S. India, very low inventory; we're not currently selling to India in the past couple of months but I'm sure demand will be there. There is some subsidy issues, I guess, both in potash and in phosphate, and we'll see how that turns out. In terms of global supply, we still see Belarusian product being 3 million or 4 million tons lower than capacity. And given the current demand, we think it's a healthy environment for next year. Longer term, we don't see any major disruption until potentially BHP comes to the market; they say 2026 [ph], it seems a little optimistic to us. But again, we don't have detailed information to say anything intelligent about it at this point. So that's -- the demand is the need for replenishment, the affordability is higher than average. The overall atmosphere is in most regions, is positive. European potash is still selling around $400, and even more. We expect the fourth quarter average potash price to be almost at the level of our third quarter. In terms of selling prices, nothing really has changed, just at the beginning of the third quarter we were still selling at higher prices in some regions. So that's pretty much what we're seeing at this point. In terms of our production, we will be next year expecting 4.7 million to 4.8 million tons, it’s where our initial expectation is. Hope that answered? Joel, your line is unmuted. Please unmute yourself. We're not able to hear you.

Yes, that's it guys. Thank you.

Thank you very much. You have no further questions, please proceed.

All right. So thanks very much for joining us. We appreciate it and hope for the safety of all, and looking forward to coming back and reporting to you at the end of the next quarter, reporting for the year and by then we'll be able to come out and give you our forecast for next year. Thank you very much.

Thank you very much.