Good day everyone. And welcome to the ICL Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions, during the question-and-answer session. [Operator Instructions]. Please note, this call is being recorded. [Operator Instructions]. It is now my pleasure to turn the conference over to Peggy Reilly Tharp. Please go ahead.

Okay. Thank you. Hello, everyone. I'm Peggy Reilly Tharp, Vice President of Global Investor Relations for ICL Group. I'd like to welcome you, and thank you for joining us today for our earnings call. This event is being webcast live on our website at icl-group.com., and there will be a replay available a few hours after the live call, and a transcript shortly thereafter. Earlier today, we filed our report and presentation with the securities authorities, and the stock exchange in Israel, and tomorrow once the SEC EDGAR website reopens, we will do so in the U.S. Those reports, as well as the press release and our presentation, are available on our website as of this morning. 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 this call at any time. We will begin with a presentation by our CEO, Mr. Raviv Zoller, followed by Mr. Aviram Lahav, our CFO. After the presentation, we will open the line for the Q&A session. And I would now like to turn the call over to Raviv.

Thanks, Peggy, and welcome everyone. I would like to begin by providing a brief update on the situation in Israel, which is now in its 14th month. We have continued to address the challenges caused by the war, including fluctuations in the number of reservists called to service, and ongoing logistics related issues. We remain committed to delivering against our 2024 plan, while continuing to manage all areas under our control, and preparing for potential external risks and scenarios. Now if you will please turn to Slide 3, for a brief overview of third quarter results, which continued the positive trend we saw in the first half of the year. Sales of $1.753 billion, were up for the third consecutive quarter, while adjusted EBITDA of $383 million was up for the fourth consecutive quarter. EBITDA was also up 11% on a year-over-year basis, as EBITDA margin expanded from 19% to 22%. Throughout the first nine months of 2024 as always, we maintained our focus on cash generation. As a result, our free cash flow strengthened throughout the year, with a year-to-date free cash flow of $572 million. Adjusted earnings per share has also improved every quarter this year, and for the third quarter we delivered adjusted EPS of $0.11 up 10% on a sequential basis. In the third quarter, our specialty driven business divisions, Industrial Products, Phosphate Solutions and Growing Solutions reported a 37% year-over-year increase in EBITDA. For the third quarter, our potash business division represented approximately 30% of total EBITDA, versus nearly 50% in the same quarter last year. We continue to return value to our shareholders via our industry leading dividend and next month we will distribute another dividend payment of approximately $0.05 per share. We also maintained our focus on expanding ICL's innovative product pipeline across…

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 market metrics. Since we are a truly global company serving a variety of end markets, we look beyond fertilizer prices to a wider array of macro indicators. Starting with inflation, where the U.S. and EU saw decreases in the third quarter, while China, Brazil and Israel also increases which ranged from 20 to 60 basis points. Interest rates decreased versus the prior quarter in the U.S., EU and UK remained steady in Israel and India and increased in Brazil. Global industrial production was stable in the quarter with improving trends expected into the next few quarters. On a sequential basis, housing starts picked up slightly in the U.S. in both the second and third quarters this year. Turning to Slide 12, in key fertilizer market metrics across the board, grain prices ended the third quarter lower while farmer sentiment significantly softened. However, data for October showed a surprising pre election bounce in sentiment as farmers expressed some optimism that economic conditions will improve and that there will not be an extended downturn in the farm economy. Potash and phosphate prices continue to diverge, with potash prices maintaining their descent while fossil prices increased slightly versus the second quarter and significantly year-over-year. While ocean freight rates decreased in the quarter reaching the lowest level since the third quarter of 2023. At ICL we continue to see higher overall logistical cost. On Slide 13, you can see some key market metrics for energy storage and electric vehicles. While both are growing at roughly the same pace over the next few years, the most significant increase in demand is still expected later in the decade. As Raviv…

Thank you. [Operator Instructions] We'll take our first question from Rahi Parikh with Barclays. Please go ahead. Your line is open. Hi everyone and congrats on the results.

Hi, everyone, and congrats on the results. I'm obviously coming in for Ben. And the first question that we have is, do you have any preliminary specialty outlook for 2025 given that 2024 is coming together much better than initially anticipated? And I have a follow up for after that.

Okay. So as you can imagine -- first of all, hi, how are you? And I hope you get to touch base. We have -- yes, we do have preliminary thoughts about 2025. It hasn't filled up, that's what budget for '25, but we definitely, I mean, the ideas and the axioms for '25, if I go industry-by-industry, I would suggest that we see basically further stabilization or firming up around the potash starting from that hopefully continuation of the good track record that you have on phosphate and its derivatives on industrial products. As you know, a lot of it depends on the market side and the demand that's going to firm up. We believe that during the year, demand should be picking up. We are not waiting for the demand, as you know. We are supplying basically at full steam, but this should drive prices up. And finally, on the growing solution side, we're hopeful that we continue the very positive journey that we embarked upon in '25 is going to be a better year there. So again, we're going to work on it. We don't have a version that we're ready to share at this time, but the trends basically look okay. Anything I missed, Raviv? Anything you've learned?

No, it looks perfect.

Okay. So that's '25. And of course, once we have better picture, as always, we'll find a way to share it. And it will culminate in the guidance that obviously we will give when we come out with Q4 and '24. We will also, of course, give the guidance for '25, as we did in the previous two years.

Okay. Thanks, Aviram. And then also just on geopolitics, do you see, is the impact still just on increased shipping costs or are there issues getting tons out in the area? And then what's your take on the Belarus notion to cut 10% of production? Thanks so much.

Okay. So thanks for the question. Geopolitics, of course, nobody has a crystal ball, but the main issue for us is logistics and shipping. And during the third quarter, we made certain adjustments to make sure that if necessary, we could get all our product out port instead of two. That has a certain cost to it. We saw -- if you look at the bridge of quarter versus quarter last year, there was an increase of $13 million in transportation costs. So a huge chunk of that has to do with the adjustment to move out of one portion. So we're hoping, of course, that in the coming months things will work out to the better and that we lose that problem that we don't like to face. But in terms of our abilities, we're much more flexible now because we can actually ship all of our product from one port. It means that part of the adjustment that was made this year was that we're shipping more to the western hemisphere than we did before. So the negative is that we have less flexibility on our shipping destinations. The positive is we get better. We actually got a better return from the western hemisphere. And given that the current situation is that, we see that the price for the beginning of next year when we sell product for January, we get better return than the spot price, then we prefer to defer product to any product left, which is not a whole lot to next year, so that's on geopolitics and transportation. In terms of Belarusia [ph], we don't really know. There were certain things said. There are a lot of rumors in the market that if things were said, there probably is reason for that, but we don't actually know. We do understand that the marginal price of shipping products from Belarusia to China by train is at its very low, which means, there isn't any profitability there. Or at least that's what we understand. So if that's the case, then I guess the Belarusians have to do something. And what exactly they do is the big question. But all-in-all, the trends in the potash market look like prices are affirming. The eastern prices are firming in all markets other than China. But inland China also looks like its getting tightened. And Brazil future sales are at a higher price than the spot sales. So all-in-all looks like potash market is firming. The only place where I don't know at this point is Europe's off season and we don't see any particular demand. But in all other regions there's significant potash demand given the need for soil replenishment. So things are looking good on the put outside with or without Belarusian use.

Awesome. Thank you so much.

Thank you.

Thank you. Our next question comes from Alex Jones with the Bank of America. Please go ahead. Your line is open.

Great. Thanks very much for taking my questions. Two if I can. The first on the guidance for the year on specialties EBITDA, could you talk about what the sensitivity is within that range? The $100 million sort of top to bottom and what would drive that to the bottom end or the top end, please? And then the second question specifically on industrial products. If I look at the pricing this quarter, it was sequentially improved, still down 6% year-on-year, but much better than the double-digit declines you've reported in recent quarters. Is that indicative of a trend? Should we expect pricing to return positive into next year from what you're currently seeing in the market or any comments you have there?

Which part of the business. Alex, if I may?

Industrial products.

Industrial IP. Okay.

I'll start with the second question. I'm not sure that I heard the first question, so I'll pass it on to you.

Yes.

On industrial products, the price is relatively stable and there's a little bit of seasonality. Like for now, there's a little bit of price going up, because of winter stoppage in China. But the prices have pretty much stabilized in the past few months and there's no meaningful change in price in recent months. There is a little bit less of sales of clear brine fluids in the quarter, has to do again with seasonal effects, nothing real. In terms of output, we're almost at full output. So I guess as long as we're at full output, there's no reason for too much price appreciation. Price appreciation will probably appear once demand strengthens on the electronic side. Real estate is going to take a little more building and real estate is going to take a little longer. I didn't actually hear the whole first question, so pass it on.

I can do it. Hi Alex, and thank you for the question. Basically, when we look at Q4, the way it is shaping up in many ways, it should be a similar quarter maybe that was not to Q4, Q3, Q3 and Q4, maybe to some extent this will be a bit seasonality will kick in, maybe a little bit lower than we saw. Obviously a lot of the differential vis-à-vis the quarter will potentially come from the potash, which Raviv spoke about and also our release spoke about. So if I zero in on the three business divisions that comprise, the specialty side of the business, then I would say that if I look at them each, all of them should be to some degree seasonally adjusted, not as strong as Q3, the differences are not that big. And if we do the math, and we compile Q4 to what we came out in the three quarters, this one that we are reporting today in hand, then we should be firmly in the territory of our new guidance. So what can drive it to the upper side is, results that will be somewhat better in the different markets, each of them with their own story, which could drive it a little bit down, would be obviously the other side. But we feel pretty well with the guidance that we shared with the market, which is definitely better than what we saw after Q2. That's also on the back of obviously the Q3, which we're coming out today, which is basically a good quarter. We normally tend to be, as you all know, quite conservative and we take extra care to fulfil our obligations to the market. So there you have it.

And maybe just to add on the fourth quarter that typically the seasonality, is right to the last moment. So an industrial product. There's a real question on how December looks and also growing solutions typically at the end of the year, we see a drop in the strength of demand. So we see typically Q4 is a little weaker than Q3.

Also there's Brazil, if I may just append a quick note, which just reminded me it's basically the Brazilian market, which obviously in the second half of the year, has a lot of importance in the Southern Hemisphere, of course, and Brazil is obviously so important from the agricultural point of view, but it's quite volatile. So I think, adding to what Raviv said, a lot will be determined by how strong is the very end of the year. And that will now obviously only in the early days of 2025, but we seem to be well on track.

Thank you.

Welcome.

Thank you, Alex.

Thank you. Our next question comes from Joel Jackson with BMO Capital Markets. Please go ahead. Your line is open.

Hi, good afternoon. I'm going to ask a few questions one-by-one. Good morning or good afternoon. Could we talk about when you've raised the specialties guidance for the year here by about $100 million? Can you break that down as much as you can between specialty phosphate, commodity phosphates, bromine and potash especially, excuse me, not potash, but growing solutions have 100 has improved how the business improved by about 100?

Yes. So growing solutions is going to be a little weaker than third quarter and industrial products, is going to be a little weaker than third quarter. Like we mentioned before because of seasonality, we don't want to break through. But….

Sorry to interrupt, but what I'm saying is for the full year over the two quarters, Q3 and Q4, you said it's 100 more. So I'm sort of asking across the second half of the year, not the repeating the question prior person asked about Q4. Sorry?

Yes. So again on industrial products and growing solutions, we see fourth quarter being a little weaker than Q3, and phosphate solutions will be relatively similar to Q3. We don't break up specialties and commodities on phosphate for a simple reason that, we leave ourselves the flexibility to sell whatever makes sense in the market. We're short on both specialties and commodities, so we look at the best alternative at the time. And the year still has almost two months to go, so it's too early to break them up.

Maybe I could ask it differently? Versus three months ago, between growing solutions, phosphate and IP, which business has surprised you most to the upside?

I think that the surprises that we got, some of them surprised, surprise was in phosphate. Phosphate is enjoying a good period, a good period versus obviously the last year, and a good period versus what we internally budgeted. And I think we all understand the macro side that is contributing to that, and that is both the commodities and the specialty side, without going into the breakdown there. What we - I'm not sure it surprised us, but what we are getting more and more confident with and happy with is what's going on the agricultural side in the company. The strategy basically has always been there, to differentiate and to grow the specialty fertilizer side, to grow the biostimulants, et cetera side. And it is working and we see that we are getting a healthy margin. And that is. I'm not sure it's a surprise, Joel, but we're very happy with it. On the industrial products, basically, we also had a good quarter and this is, as we know now, it's a fight inside a market that the demand is not healthy yet. So we are supplying obviously at high capacity, but the selling prices is nowhere near. But notwithstanding that, we were able to deliver a solid quarter, I'm not sure it surprised us, but we were happy with it. So there you have basically - the three. If I sum up, it's the three divisions that they did better. And I think it's a highlight of the quarter itself.

That's helpful. And my final question is, in your release and presentation, use language like you intend to limit total potash sales this year to 4.6 million tons in expectation of improved conditions. Now, if I look at your last four quarters of production, you've done about 4.5 million tons. The run rate is lower the first three quarters of 2024, so it looks like, you don't have the production to do more than 4.6. You said in expectation of improved conditions. What does that mean? Are you talking about all you're holding back volume, to get better price next year though we just talked about what the production has been. Is this improved conditions in logistics? I'm just trying to understand what the exact message you're putting out there today. Production, sales, discipline, anything you want to talk about?

So the message is simple. Currently, we're capable of producing about 4.65 this year. And we're capable of selling about 4.75. But at this point it doesn't make sense to sell any more than we've already committed. So the reason is twofold. One, is because prices are firming for next year. So, we actually have already sold for January and February. And second, is that due to the current logistic challenges, we feel that if we can defer sales, certain sales, we can get better transportation costs. Hopefully if the security situation improves. If it doesn't improve, then it's only the pricing. But if it doesn't prove then it's also the logistics, which are very significant. Just so you understand, in order to. In order to transport to the East, in some cases costs double if we send the product out of the port, that is - further from the plant. So it makes sense from both of those perspectives. And at a certain point we decided to stop. And actually part of - the fact that we're stopping, means that we're actually capable of less production. We would have been capable of more production, but we added additional preventive maintenance, because in the past year or so, because of a lot of people being on reserve duty, then we had to take some calculated risks and do less preventive maintenance. And you can't keep on going that way for a long time, without paying a dear price. So we took some preventive - preventing steps - this quarter. It's actually not this quarter, it's September and October and due to that our maximum production for this year could be a little over 4.6. It was more than that a little while ago. But we're comfortable with what we did, because we sort of cleaned up everything that needed to be done in order to minimize the risk going forward. Hope that answers.

Thank you.

Thank you, Joel.

Thank you. We will move next with Kevin Estok with Jefferies. Please go ahead. Your line is open.

Hi, good morning, Good afternoon everyone. I guess with respect to the innovation platform, I'm just curious what your guys appetite may be for investing in white spaces. So for example like, if the EU goes forward with allowing gene editing for fruits, vegetables, et cetera, I guess could ICL get into that space as a way to maybe hedge risk on, I mean, improvements in nutrient efficiency?

Could you repeat the question, because it was difficult for us to hear?

Oh, apologies. Basically just curious to know like more about I guess, your appetite in investing in white spaces. So if you move forward in like gene editing, right, for fruits, vegetables, wheat, rice, et cetera. Just wanted to know if you guys - would invest in those areas basically to hedge the risk against, increasing nutrient efficiency?

So okay, I'll take that, I'll try to answer you and I'm taking it a little bit broader maybe than you meant. So you will keep me in line. So basically, as you know, starting from the mere setup of the growing solutions, it's our flag to do, to be innovative and to differentiate ourselves, that's a given. Second is, we are investing in areas that we believe that will be significant or very significant in the future of agriculture. And that obviously is the area of the biologicals, some in delivery systems, in better uptake inside the plant, et cetera. However, and as a big however, what we do is applied R&D. We are taking steps, gradual steps to build up the portfolio. What we are not doing, is that to do leapfrogs and go into areas, which today are really exploratory. And we will come into, I guess we will come into these areas. But we are stretching the limits of GS, but we are not going into things, which are today quite remote from the core of our essence. And that's why if you - if I understand you correctly, you're talking about white space cases. It's really, really going to the forefront of inter alia gene editing and things like that, which I know from my past that companies have gone into. But it's, I would say it's in the - chemical space. It's a way to go there. I mean, it's not as advanced obviously as the pharma world. And the long answer to a short question was we are careful to build block-after-block in our innovation, and not jump too far ahead that we don't have the pool together yet. Is that what you had in mind?

And then I guess my last.

Yes, go ahead.

Yes, that was helpful. Yes, I appreciate it.

Yes.

Yes, and I guess just - apologies if you've covered this already, but I guess near term, do you guys have a sense of how much Chinese bromine capacity has exited the market, if any?

We think - very little has actually completely exited, but there's quite a lot of production tons that are muted now. So it could be a matter of time until some exits. So the answer is there's about, I'd say all in all about 60,000 to 70,000 tons that's been muted so far. But in terms of bankruptcies, or actually companies leaving the market, probably about 15,000 tons so far. Again, these are rough estimates. They're not accurate, but they're pretty accurate.

It's basically Chinese ownership. It's not in China.

Correct. Yes, some of those tons are non-Chinese.

They're high cost tonnage. So our, let's say assumption basically is when the prices stick around the low end, and we have such a great cost position, which is superior to everybody else. There's a limit of time and there's a limit of prices that those Chinese can sustain. That's exactly the strategy that we're deploying and you see the results.

Thank you very much.

Thank you, Kevin.

Thank you. And we show no further questions at this time. I will turn the call back to Ravi Zoller for closing comments.

Okay. So thank you very much for joining us for our conference call for Q3. I want to thank ICL employees for their great contribution to a fine quarter. We're very positive about the way we're positioned for future growth now, with the markets looking the way they are. And hopefully when the geopolitical constraints go away, we're ready to take off. So looking forward to reporting back to you on fourth quarter results, and full year results. Thank you very much for joining us today, and have a great rest of the day.

Thank you.

And this does conclude today's program. Thank you for your participation. You may disconnect at any time.