Ladies and gentlemen, thank you for standing by, and welcome to the ICL Analyst Conference Call. Our presentation today will be followed by a question-and-answer session. [Operator Instructions] I'd like to hand the call over to our 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 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. As I have in the past few quarters, I would like to provide a brief update on the situation in Israel. Although we still face challenges caused by the war, we once again executed against our plan in the second quarter and delivered solid results. While the geopolitical situation remains tense, our teams have done an excellent job of managing existing risk while planning and preparing for different potential scenarios. Now if you will please turn to slide 3 for a brief overview of second quarter results, which were down versus the prior year as expected. However, sales of $1.752 billion were up for the second consecutive quarter, while adjusted EBITDA of $377 million was up for the third consecutive quarter with EBITDA margin increasing to 22%. For the second quarter, adjusted earnings per share were $0.10, up 11% on a sequential basis. Next month, we will distribute a dividend of about $0.05 per share as we continue to return value to our shareholders. All three of our specialties driven business divisions, Industrial Products, Phosphate Solutions and Growing Solutions, delivered consecutive quarterly and year-over-year growth in EBITDA. For potash, we saw fertilizer prices stabilize during second quarter. We continue to drive efficiency efforts in cash generation in the second quarter, and Aviram will provide some more detail later in the call. We also continue to gain market share across our specialties driven business divisions, both organically and by acquisition. I would ask you to turn now to Slide 4 and to look at both year-over-year and quarter-over-quarter trends for some key financial metrics. As you can see, we delivered quarter-over-quarter improvement across the board. Our specialties driven business divisions also achieved year-over-year improvement and margin expansion versus both prior periods. In the second quarter, we…

Thank you, Raviv, and to all of you for joining us today. Let us get started on slide 11 and take a look at some key macro indicators. We are seeing signs of stabilization in terms of inflation and interest rates. Industrial production continues to gradually improve, and this trend is expected to continue into the second half of the year. In the U.S., housing starts moderated in the second quarter, small uptick in June after weak May. Turning to Slide 12 and key fertilizer market metrics, grain prices stabilized in Q2 versus Q1 and farmer sentiment moderated. Concerns about higher interest rates and expectations for farm income to continue to fall this year after reaching record highs in 2022 weighed on farmer sentiment. While prices for potash and phosphate declined year-over-year, fertilizer prices in general have stabilized. Freight rates remain elevated as global container operators have been forced to send vessels around Southern Africa's Cape of Good Hope to avoid the Red Sea, creating a shortage of vessels and port bottlenecks. On slide 13, you can see key energy storage market metrics. There has been no fundamental change from past quarters as more rapid growth is still expected in the outer years with more gradual growth in the near term. As Raviv mentioned, we are being conservative in our capital spend to achieve higher certainty, aligning with our customers' product qualification and commercial production timelines. If you will now turn to slide 14 and our second quarter sales bridges, on the left side, you can see year-over-year improvement for each of our specialties driven business divisions, resulting in second quarter of 2024 sales of $1.8 billion. On a quarterly sequential basis, specialty sales also increased. Turning to the right side of the slide, you can see a year-over-year increase…

Thank you. [Operator Instructions]. Our first question today will come from the line of Ben Theurer of Barclays. Please go ahead.

Hi. Good, afternoon to you. So thank you very much, for taking my questions. Congrats on those, very strong results. Two quick ones. So number one, just wanted to understand and maybe help us, frame a little bit what you're seeing, in terms of demand, particularly in the industrial products segment. Clearly, I guess the improvement and also the profitability, the sequential improvement here, is clearly a good sign. Just wanted to see if you could, talk a little bit about just general economic activity and what your expectations are within industrial products for the second half and then into 2025 as we move, maybe into little less easier comps than what we're having now in in the short term. So that would be my first question, and I have a quick follow-up.

So, in terms of, demand, what we're seeing is that, electronics are coming back, but slower than we expected at this point. There's a lot of room for improvement, and, of course, we're waiting for the effects of the new AI boom and Microsoft Pilot success and -- Microsoft Copilot success, etc. and of course EVs, which are moving slow slower than expected this year, but ultimately are going to move as fast as anybody expected and, construction, of course, also, not really any change these months, but that was expected. The construction cycle is always longer. So I would say that, in, you know, most other in in most other industries, demand is very healthy. Electronics is still below normal but improving. Construction is below normal and not improving yet. Otherwise, there's nothing to nothing to report. First quarter, clear brine fluids were a little higher than expected, and second quarter a little lower than expected. That has to do among other things with, weather issues and, and rig schedules, but nothing, nothing important there.

If I may. Hi, Ben. Just a moment before you move on to your next question, with regards to IP profitability or profits. I also want to suggest that the fact that we are pursuing aggressively sales of, quantities to our customers and are running at next to full yield means that we are collecting on the way a much better absorption of our cost which translates into tens of millions of improvement in dollars and this is something that the decision that we've taken, and we're pursuing it to the maximum. So you can imagine what will happen when the demand picks up and we can basically translate also a positive price variance. It'll be very, very good, but in the meantime, we're not waiting, and it's quarter after quarter. And you are seeing the results of the IP division being very similar in Q2 to Q1 and that is entirely because of what I just described.

Okay. And then, just to on phosphate solutions, that was obviously a very strong, result here on the growth with let's call it stable sales, but EBITDA actually improving. So first of all, on the top line, could you help us understand how much was volume related, how was how much was price related? And then in order to understand a little bit that margin expansion and that strong EBITDA growth, if you could give us a couple of examples where, like, the more specialty piece of phosphate solutions really comes in and kicks in from a margin potential driving that EBITDA growth, to that 13% level year-over-year.

So on commodities is the easy part. There's a little bit of price appreciation in the second quarter. It's also continuing in the third quarter. So we see a little bit of price appreciation on commodities phosphate in the third quarter as well. On specialties, it's really all about volume. It's introduction of new products and increase of sales in certain markets, including additional capacity that we added in China on the food business, and also, strong sales in in North America and, in South America. The tailwinds hit here are from the fact that, when commodity prices are not under pressure and WPA is not coming in from, China to Europe and Brazil, then there's less, less pressure on price, and prices are relatively stable as we, increase volumes. So on specialties, it's mostly volume, and on commodities, it's mostly price.

Okay. Got it. Thank you very much.

Thank you. Our next question comes from the line of Joel Jackson, BMO Capital. Please go ahead.

Good afternoon. Okay. A few questions. I'll do one by one. I thought maybe a high level question to start if you don't mind. LFP materials, it feels like when looking at some of the industry data lately that LFP inventories are extremely high in China, certainly more than what electric vehicle demand would suggest is required right now. You're delaying your plant in St. Louis. Would you comment on the LFP kind of dynamic right now and how that affects your business with high purity acid and things you're thinking about bad business to adjust to the tougher dynamic lately?

Sure. So, LFP is increasing in market share in, in China. So while the market is not exactly moving as fast as anybody expected. LFP is gaining market share significantly this year. So it's going up from less than 40% to expected about 70% within the next year, and as a result our sales of raw material for LFP are actually at an all-time high in terms of volume and we expect that, although EVs are moving slowly globally, what is moving very fast both in China and globally is, LFP for storage and since there's very little capacity for LFP in the western world, it's just a matter of time that the demand turns into actual deliveries, but it will take time because the infrastructure for the production does not exist in the western world as of yet. So on the one hand, if we look globally, EVs are moving much slower than expected. Stationary storage is moving faster than expected. LFP is penetrating and increasing its market share much faster than expected.

So, Raviv, you're not worried about an oversupply of LFP cathodes right now in China that would require some sort of rationalization over the short term to rise as inventories and maybe require you to sell less in the end terms to the market's more balanced?

We're not worried because, in China, we're not producing LFP cathode. We're producing, raw material for LFP cathode. So we have excess demand for MAP and other fertilizer type products in China. So if we had to sell less cathode for battery raw materials then we would just sell more specialty fertilizers in China. It's not a concern for us in the short term. In the long term, if you look at the western part of the world, it's really not relevant for us for 2024, 2025, or even the first half of 2026. We need to look at what's gonna happen in the market, 2026 and 2027 vis a vis what our customers in North America and hopefully, Europe, because we have other ideas for Europe, what they need and when they need it, because we're not going to put the capital to build capacity for customers that are not gonna be ready to produce their batteries before 2027 or 2028. So what we're doing is, we're building, an innovation qualification center in St. Louis that will be up and running by the end of the year, and we are going to qualify product with multiple customers. By the way, many of them in the stationary in the stationary part of the business, and we expect that we will optimize whatever production capacity that we can create with long-term agreements with these qualified customers, and so most of the news is going to be coming out next year.

Okay. Thank you for that. Turning to IP, Aviram, you talked about how Q1 earnings were similar to Q1. It's clearly showing in the results. How do you think second half IP operating results, earnings wise, will look versus the first half again for IP?

I'll give you my take and then obviously Raviv will add and hopefully agree. I think it's gonna be quite similar. I think we are on a positive track. Although, I would say that the market from the demand side is not is not there yet with the prices. That that should come further, but I believe we'll continue the positive trajectory that we're on and my guesstimate, as I said, for the for the IP second half, would be quite similar to the first half.

Okay. And just one more question if may sneak it in. So when you raised your guidance this year for $100 million more of EBITDA from specialties, could you break that down? How much of that extra $100 million is coming from commodity phosphate, specialty phosphate, growing solutions, and IP?

No. I think that we did our math, Joel, and without getting into the particulars each of them, by the way, it's a range. We put -- you're right that the midpoint has been raised by a $100 million, but we're now given the range of $800 million to $1 billion, which is quite wide. I think we are in a good spot there and what I can say that this is very good news because it's coming across the board from all our specialty units. The breakdown, it's much more fluid and I don't want to get into the data.

Why didn't you narrow the range? We're already halfway through the year. Why is the range still $200 million?

It's a good question. And I think the reason for that, and I agree with Aviram’s take of three of our specialty businesses are above budget and above expectations. I think the reason for that is that we're in the middle of the war and it would be unconservative of us to give investors the feel that the risk doesn't exist anymore. There's still risk on our business and we need to be more careful this year, but other than that we're a lot more optimistic than we were at the beginning of last quarter.

And we take extra care, never to disappoint. So we rather to go that way.

Okay. Thanks for asking answer all my questions.

Thank you. [Operator Instructions]. We have an incoming question, which I will read out. It comes from the line of Lisa De Neve of Morgan Stanley.

Can you please share the dynamics you're seeing in the bromine market and provide an update on your commercial strategy? How are you managing value versus value? Can you also share how the EU duties on phosphate-based flame retardants from China has impacted the EU market?

Okay. So I think we answered that question earlier. I think, Aviram gave, gave the key points. Maybe, I would add, on phosphorus that because of the new situation that actually allows us to bring in new innovative solutions that are suddenly competitive because we couldn't introduce some products because of low prices of phosphorus coming out of China in Europe, and we have some unique products that are a lot more sustainable and safer, but they demand a premium. So they suddenly have become economic, and that means that we have the opportunity to grow our phosphorus business in Europe. We estimate that the same is going to happen in the U.S., and as a result, we have two mature products that will be pretty significant flame retardant products that are coming into the market and show potential for additional business for IP division. So it's good news for us. Otherwise, I think the dynamics were described. It is important to note that in the bromine business, most of our business is contracted for quantities for the long term and that gives us the flexibility when we want to sell more quantities, to deliver more on these contracts and as a result it's easier for us to take additional market share when we feel that it's in our interest and right now it's in our interest and that's what we're doing. So we're taking market share until prices start going the other direction, and then we'll be back to more value over volume type strategy. Hope that answers.

Maybe just to augment this by if you watch our quantity variance, it's very significant. It's a positive significant in the quarter if you benchmark it vis a vis the respective period of last year and that's obviously a direct decision to commercially to go after opportunities that we have and it's working and I think it's a very positive one.

We have another incoming question, in the line of Erika Eve.

Which ports are you using in Israel for exports? Which issues are you facing in the Red Sea? How much operating income/EBITDA do you generate from exports from Israel?

So first of all, we're using the same ports. We're using the port of Eilat, which goes to the Red Sea -- which is an outlet to the Red Sea less than before. So we're taking some of our shipments around -- some more of our shipments around Africa. It has some additional cost, even though we have been compensated to some extent from our customers, but the same amount of export is coming out as was before. There's been no change. Obviously, any export that is done through the Red Sea is under danger of attack and many of our ships were in danger of being attacked during the past 10 months, and we have only to thank those shipping companies that have worked diligently with us and done everything possible with us to keep our staff safe and we've been lucky enough to stay safe until now and hopefully that will continue, but in the interest of safety, not because we can't, in the interest of safety we are delivering less through the Dead Sea, and we're hoping very much that the overall security situation will improve soon and we're very hopeful that will be the case. The long-term effect of course could be additional cost. It's not very material, but it's still millions of dollars that, of course, we would like to avoid. I hope that answers.

There was another question of even the operating income, how much of it is derived from Israel? If you want to address it, then I'll say a bit more if you want.

Yeah. The I guess the relevant, question is because, a lot of the export income comes from, Israel. It's about 2/3 of the overall and the part that is concession related is about1/3 of overall, profitability of the company. I Hope that answers. By the way, it was about 2/3, five years ago, 2/3 was concession related and now it's about a little more than 1/3.

Thank you. You have no further questions. Please proceed.

Okay. So thanks again for joining our call and reviewing the quarter with us. We look forward to coming back to you with next quarter with Q3 results and I wanna thank all ICL employees and to everybody that made this call possible. Thank you very much, and have a great rest of your day.

[Operator Closing Remarks].