ICL Group Ltd. Q4 FY2022 Earnings Call

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. I must advise you that this call is being recorded today. 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.

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 US 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 is 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 for the Q&A session. Raviv, please.

Thanks, Peggy, and welcome, everyone. Today, we're proud to report record annual results for 2022, with sales of more than $10 billion and EBITDA of more than $4 billion. All three of our specialty solutions businesses delivered record performance in 2022 as we benefited from the results of our long-term strategy. We also saw very significant commodity upside as several macro events collided. First, the Ukraine-Russia conflict greatly impacted global agriculture in 2022 and resulted in elevated grain prices, which in turn, drove prices higher for crops and livestock. The global grain stock to use ratio ended 2022 at its lowest in more than a decade and is forecasted to remain tight into 2023. Due to global concerns, increases in fertilizer prices accelerated in the first half of 2022 but moderated in the second half. There was an estimated 5% decline in global fertilizer consumption in 2022, and farmers who skipped treatments will need to reconsider their decision in 2023. Farmer affordability and sentiment improved toward the year-end, and as there is rising concern over a global food crisis, fertilizer volumes are likely to trend upward in 2023. In December, the Purdue University autonomous barometer showed that the biggest improvement came from farmers' assessment of their current conditions. Farmers were more positive about the future in December and showed improved sentiment regarding their financial conditions. Meanwhile, consumer spending patterns shifted as inflation and interest rates reduced buying power. While the effects varied regionally, they impacted some key end markets for ICL such as electronics, housing, and automotive. The recent reopening of China will influence developments in the months to come, as will the increased momentum in ESG-related spending. The electric vehicle revolution remains a bright spot as countries continue to invest in competing mobility transformation technologies. Finally, supply chain issues eased in recent months and current trends indicate additional improvement in 2023. Let's turn to ICL's results on Slide 3, where you can see an overview of our record year, which was capped by a record fourth quarter. In addition to the annual sales and EBITDA achievements I mentioned, we also saw record annual production of more than 4 million tonnes at Dead Sea. We delivered record cash flow for the year of $1.3 billion, which was up more than 180%. Operating cash flow for 2022 of more than $2 billion was up 90% versus the prior year. In 2022, adjusted diluted earnings per share of $1.82 was up more than 180%. We also delivered cash directly to our shareholders in 2022 as we declared $1.2 billion of dividends and $0.91 per share for 2022. Importantly, we took advantage of our record year and resolved several outstanding challenges, which Aviram will discuss in more detail later in the presentation. Now please turn to Slide 4, where you can see historical trends for some of our key financial metrics. Clearly, 2022 was a remarkable and somewhat abnormal year, just as 2020 was during COVID. While we appreciate the good fortune we experienced in 2022, we remain focused on our long-term transformation. We believe our growth trajectory going forward, especially for our specialties businesses, will be more in line with the longer-term trends seen on the slide. While we do not have control over commodity markets and prices, we do know that our specialty solutions provide us with the level of normalcy amidst the external noise. This is the benefit of our strategy and we look forward to delivering stable and consistent growth over the long term by executing against our recently presented five-year plan. But improving our results will not only be financial. On Slide 5, you will see that sometimes it is a good thing to report a downward trend. Sustainability remains a critical part of our mission and our future. I'm very pleased to report we have seen significant improvements across the board in the areas of safety and the reduction of GHG emissions. For safety, our incident rate continued its downward path for the fourth straight year in a row. Going back a bit further to 2018, we have achieved an 18% reduction in GHG emissions since that time, ahead of our stated target calling for a 30% reduction by 2030. Slide 6 goes into more detail about our substantial year-over-year financial improvement. Throughout 2022, we continued to drive growth and cash flow generation. Notably, I'm pleased we were able to share our record year with all our stakeholders, including the communities where we live and work. I'm proud to include this data, as well as point out that we managed to keep our overall expenses flat. Please notice that we incorporated some other non-financial metrics and track regularly. On Slide 7, there's a seller overview of our fourth quarter results. We saw returns to more traditional fourth quarter seasonality in 2022 with many of our suppliers and customers also observing similar trends at year-end. I would now like to begin our segment review with Industrial Products on Slide 8. Record annual sales of $1.766 billion were up nearly 10%, while record annual EBITDA of $689 million was up nearly 40% year over year. We continued to achieve margin expansion as EBITDA margin improved to 39% for the full year and 32% for the fourth quarter. Fourth quarter sales and EBITDA were down year over year as the fourth quarter of 2021 did not experience more traditional seasonality due to an out of the ordinary abundance of mid-COVID demand in the electronics and construction end markets, as well as out of the ordinary production constraints from competitors. Throughout 2022, higher prices helped offset higher raw material costs as industrial products maintained its strategic focus on value over volume. As 2022 progressed, end market demand diverged. Weakness in electronics accelerated in the second half of the year as consumers struggled with inflation, while the construction market suffered from both inflation and higher interest rates. As a result, our customers ended 2022 with increased inventory. The oil and gas industry saw significant demand since the Ukraine-Russia conflict, which benefited our clear brine fluids business. Our specialty minerals business remained stable throughout 2022. Turning to Slide 9 in our phosphate solutions division, we reported record annual sales and EBITDA of $3.106 billion and $966 million, respectively, with record specialty sales and EBITDA for both our food and industrial solutions. For 2022, specialties made up nearly 60% of sales and 45% of EBITDA. We also saw record annual sales and EBITDA for our phosphate commodities business and had another record year at our YPH joint venture in China. Throughout 2022, higher prices and demand helped offset significant increases in the prices of raw materials. Another trend for 2022 included the persistent supply chain challenges, which did not ease in the fourth quarter and are expected to linger into 2023. Finally, the big news for phosphate specialties in 2022 was when the US Department of Energy awarded ICL $197 million to invest in developing cathode acting materials plant for high-quality LFP batteries. This is part of a new sustainable supply chain for energy storage solutions. On Slide 10, you will see our potash results where annual sales of $3.313 billion were up nearly 90% year-over-year, while EBITDA was nearly $2 million. Clearly, we benefited from commodity upside in our potash business, but we also maximized our opportunities throughout 2022 and added long-term contracts. As I previously mentioned, our operations at Dead Sea delivered record production for 2022 of more than 4 million tonnes as our team overachieved in terms of operational excellence and we also saw improvement in our Spanish operations. Our average potash realized price per ton came in at $643 in 2022, which was up more than 90% over 2021. For the fourth quarter, we achieved $564 per ton, which was up 16% or more than $75 versus the fourth quarter of 2021. Our metal magnesium operations delivered record sales and profit as this business, like the rest of ICL, shifted to more long-term contracts and also benefited from higher prices. Turning to Slide 11, in growing solutions, which delivered record annual sales of $2.422 billion and EBITDA of $448 million. These results were achieved in part as we successfully integrated our Brazilian acquisitions. Our FertilizerpluS products, which are based on organic polysulfate, delivered record annual production, sales, and profit. We are pleased to see all of the hard work of this team over the past few years come to fruition. Throughout 2022, our growing solutions division introduced multiple sustainable new products, and these efforts helped us increase our sales in Brazil and Asia. Nevertheless, EBITDA was lower in the fourth quarter due to a decrease in fertilizer demand during the latter part of 2022. Now if you will turn to Slide 12, I would like to quickly remind you about the progress we made in the areas of sustainability, innovation, and leadership during 2022. This was an amazing year with an array of new products, third-party recognition, and achievements. I cannot say enough about our team at ICL, constantly working towards the next level, and their efforts do not go unnoticed. Finally, I would like to draw your attention to Slide 13 and our outlook for 2023. For our industrial products business, which covers a vast variety of end markets, we expect to see a stronger second half of the year. For Phosphate Solutions, we expect to leverage our LFP expansion in St. Louis to build partnerships with some of the premier automotive names in the world. In our potash business, we expect to see improving affordability benefiting both farmers and suppliers. This will extend to our growing solutions business where we plan to continue growing our market share in more diverse end markets. As we formally wrap up 2022, I want to thank the entire ICL family of employees all around the world for their hard work and contributions. While I'm proud of this record year, I'm also very excited about the challenges and opportunities ahead in 2023. I would now like to turn the call over to Aviram.

Thank you, Raviv and all of you for joining us today. Let us get started on Slide 15. While Raviv already addressed some market trends and our outlook, I would like to call out certain macro highlights impacting ICL, our peers, suppliers, and customers. While inflation has moderated somewhat, it remains high, and the cost of living slowed in 2022, and consumers ended the year paying more for food and energy, especially in Europe. Across the many regions and end markets where we do business, trends diverged in 2022 and the variances became more pronounced as the year progressed. In general, growth has tempered on a worldwide basis with conditions expected to continue in the first half of 2023. While commodity prices are moderating from the peaks we saw in the first half of 2022, fertilizer prices remain elevated when compared to recent history. Farmer sentiment recovered as 2022 came to a close, and affordability also began to improve. Supply chain disruption appears to be easing for the most part, but there are some remaining constraints. Our phosphate specialty business is still facing challenges, and these are expected to continue in the near term. Finally, the geopolitical situation remains uncertain with no resolution to the Ukraine-Russia conflict in sight after nearly one year. Meanwhile, as Raviv discussed, the recent reopening of China is going to influence developments in the months to come, and how this will evolve is yet to be seen. On Slide 16, you can see the Chinese commodity trends with prices moderating, but still ahead of previous levels. Potash prices are back in line with the third quarter of 2021, as our prices for phosphoric acid stabilized and have returned to pre-COVID rates. Sulphur prices returned to levels not seen since early 2021. Throughout 2022, we were able to offset higher prices for raw materials. However, like many of our peers, we are now working through higher-priced inventory, and this trend is expected to continue into early 2023. Turning to Slide 17, where you can see that while crop prices declined somewhat from recent highs, they remain ahead of pre-COVID levels. The grain price index was somewhat stable throughout 2022, while the fertilizer price index rose sharply in the first half and declined rapidly in the second half of the year. As Raviv already mentioned, the global grain stock to use ratio ended 2022 at its lowest in more than a decade. Finally, while still elevated, energy prices came down at year-end. On the left side of Slide 18, you can see the improvement in annual sales came from all four of our segments. And we delivered more than $10 billion in total sales, a record-breaking year. On the right side of the slide, you can see the impact of higher prices from year-over-year sales, thus offsetting a negative $353 million change rate impact. While potash benefited from significantly higher prices, our specialties businesses also delivered improvement versus the prior year. Turning to Slide 19, our annual adjusted EBITDA, which was more than $4 billion, also a record. Once again, you can see the impact of higher potash prices on the left side of the slide and higher prices overall on the right side. On a segment basis, all four of our businesses contributed to the year-over-year improvement. Turning to our fourth-quarter results on Slide 20, where the picture is a little different. On the left side, you can see industrial products experienced a year-over-year decline in sales when compared to an extraordinary quarter in 2021. Some end markets, such as consumer electronics and housing, were impacted by inflation and higher interest rates. For 2022, we also saw a return to more traditional fourth-quarter seasonality here and in other businesses as many of our suppliers and customers also returned to more historical trends at year-end. Let's take a look at our fourth-quarter EBITDA on Slide 21, which demonstrated trends similar to previous quarters, specifically on the right side. I would like to call out that pricing was able to offset not only the low volume but also increases in raw materials, energy, and transportation costs and a negative exchange rate impact. I would now like to review a few highlights on Slide 22. At year-end, our net debt to EBITDA ratio remained at 0.5 times. As Raviv mentioned, we saw substantial improvement in operating and free cash flow both for the year and the quarter. We also continued to deliver sustainable shareholder value with our annual dividend yield at nearly 10%, at the high end of our peer group. Additionally, we took advantage of the favorable market conditions in 2022 to settle an outstanding dispute concerning the Israeli law for taxation of profits from natural resources. As we've previously discussed, we expect our annual tax rate to be in the 30% range going forward. Finally, turning to Slide 23, I would like to call your attention to our 2023 guidance. We are targeting adjusted EBITDA of between $2.2 billion to $2.4 billion in total and for our specialty business to contribute approximately $11 billion of that amount. And with that operator, we can begin the Q&A.

Thank you. Our first question today comes from the line of Alexander Jones from Bank of America. Please go ahead.

Hi. Thanks very much for taking my questions. Two, if I may. The first on the balance sheet, I guess, is you mentioned net debt to EBITDA at 0.5 times. Have you thought about using that to create additional shareholder distributions either in the form of extra dividends or even share buybacks? And then the second question on Industrial Products. I guess volume is down 30% year on year this quarter. Was there any element there of you sort of somewhat curtailing volumes to give support to the market prices as we might have seen in the past? And if so, how long do you think that might last and what does that tell us about sort of the price outlook for your industrial products business in 2023? Thank you.

I'll start with the second question and go back to the first because Aviram wants to add to that. In terms of industrial products, the seasonality is what we typically observe at the end of each year. Last year, the fourth quarter was unusual due to a few factors. One reason was that there was peak demand for buying TVs and home appliances that require specific flame retardants. Our customers built up inventory to navigate supply chain difficulties, resulting in demand exceeding our annual contracts. Additionally, our competitors faced production challenges due to hurricanes, adverse weather, and other factors affecting chlorine production, leading to an excellent quarter. Previous years have shown that there is seasonality in the fourth quarter. Regarding curtailments, I would refer to it as a value-over-volume strategy. We believe that at certain price points, it is more beneficial for us to hold our product, anticipating that we can sell it later at a higher price. We're not focused on increasing our market share; rather, we're aiming for maximum value creation. In the first few months of next year, we anticipate some softness in flame retardants for electronics and construction, somewhat balanced by peak demand for clear brine fluids and certain flame retardants related to electric vehicles. Therefore, after the initial months of the first half, we expect the typical cyclicality to lead to a stronger second half. This will not be like 2022, which was exceptional, but we expect the second half to align with the performance of our industrial products division in 2021. On capital allocation, regarding dividends and buybacks, we've indicated that we believe distributing 50% to 60% can be done safely while still allowing us to execute our five-year plan and manage the resources needed for M&A and capital expenditures. Each year, our Board of Directors evaluates the appropriate distribution strategy, and we are currently discussing buybacks as part of the potential 60% distribution. We will communicate any updates formally as soon as we have them. Would you like to add anything?

Just one thing. It's perfect. We check ourselves regularly as we find ourselves in the upper part of the companies that return value to shareholders already at 50%. If we had to stretch that beyond that, that could be something quite extraordinary. But we are constantly monitoring this and it's not off the table for sure.

And maybe one more thing I would add is that, you see we created free cash flow of $1.3 billion this year and we just distributed about $1.2 billion. The realistic free cash flow was a little more than that because we used over $250 million to address some previous year items, namely the tax dispute that we had for many years, the profit levy in Israel, as well as we closed some environmental issues that we had from 2017 and before. So we had some other uses for cash in 2022. At the same time, we're starting 2023 in a much better place, with a very strong balance sheet and a clean slate concerning some challenges we had in the past. Hope that answers.

Thanks, Raviv. Just maybe to follow-up on the buyback discussions you're having, do you have any timeline that we should bear in mind for hearing about that either way? Thank you.

Yes. The timeline is that we will report back to you when we announce our first-quarter results at the latest.

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

Yes. Good morning. Good afternoon. Can you hear me?

Yes.

Yes. Hi, Ben.

Okay. Perfect. Well, thank you very much. And first of all, congrats on a record year in 2022. As well, two questions, if I may. First, just looking into 2023 and some of the demand drivers you're seeing out there and what you're seeing on the contracting side. Can you share a few insights or maybe anecdotes about what you're seeing for demand in the different segments? You've laid out a little bit of a trajectory on the industrial side, but also more on the commodity piece, as well as the seasonality you used to have. How should we think about the cadence into 2023 from a demand perspective? That would be my first question.

Okay. Thanks for the question. Since I've discussed industrial products, I'll say that on phosphate specialties and growing solutions, we'll see the same kind of seasonality that we experience every year, which means pretty flat all through the year with a little bit of softness on the fertilizer side in the fourth quarter of next year. In terms of commodities, lately I would say since November, we see healthy demand in some markets, namely in Brazil, where there's very strong demand. Even now, which is February 15th, we’ve already sold over half of the annual allocation of potash to Brazil to be delivered in the first half of the year, which means that there's ample room to sell a lot of commodity. We're effectively sold out for the first quarter and for potash and phosphate until the end of the second quarter. If we look back at previous years, that’s more robust than in the past. The lowest price in the world right now is in the US, which is why we're not selling there. I think we've sold only a few thousand tons that we had commitments to the US, but we have no reason to sell in the US at this point. Brazil is very healthy. India needs product. China still has inventory. Contracts in India are coming soon. As for contracts in China, I'm not sure; I don't think anybody is in a rush at this point since, as I said, there are healthy markets to sell in. In terms of India, even though I said it's very soon, we're in no rush because we don't have any product left for the first quarter. So we don't mind if it takes a few more weeks. But I think it will be relatively soon because I think India needs products. I hope that gives a little color.

I would like to add that the prices of agricultural commodities are currently high and remain so. When you consider the decrease in fertilizer prices, the sentiment measured by Purdue and others, along with farmers' improved affordability, things are looking better. Additionally, some farmers in certain areas have decided not to use fertilizers, creating conditions that could make 2023 significantly more productive in terms of quantity compared to 2022. We could see more quantity and slightly lower prices than before, which should increase as we approach the peak of the agricultural season.

That's perfect. Thank you very much for that clarification. And then the other question really just more long-term strategic. If we take a look at the cadence and if we were to just exclude 2022 for a moment, it’s a very abnormal year as it's been described. When we take a look at the cadence of growth of EBITDA over the last couple of years from what we had pre-pandemic, particularly the specialty business, do we expect it to be close to double where it was prior to the pandemic, if we think about what you need to achieve your 2027 targets you've laid out just a few months ago. Is it fair to assume that just as markets continue to recover, with the assets you have and the focus you have, and the investments you do organically, that's enough to achieve the targets or should we think of the need to add on a little bit on the M&A side to really drive this business to the profile you're looking for in about three, four years’ time?

Thank you for the question. To model our growth, it's important to note that in our five-year plan, we've stated that we doubled our performance over the last five years and aim to do the same in the next five. Regarding profit margin, our long-term business margins are more aligned with those of 2021 rather than 2022. We anticipate continued double-digit growth in specialty sales, along with incremental margin increases each year. While there will be uncontrollable factors affecting margins, we expect overall margin expansion in the specialty businesses. If you base your projections for specialty phosphates and growing solutions on middle double-digit margins alongside past sales growth, you'll arrive at the expected figures. Additionally, mergers and acquisitions will contribute about 30% to revenue growth in growing solutions and roughly 15% in phosphate specialties. Regarding industrial products, we plan for organic growth unless unforeseen circumstances arise, and we don't rely on M&A to achieve our targets. We have ambitious goals for industrial products, supported by a detailed strategy that we are confident in. Our R&D and operations are ready, and the necessary plants are either in planning or under construction. New opportunities in specialties are emerging, particularly in the electric vehicle sector. While we anticipate cyclical changes in commodities, we would welcome a return to conditions akin to those in 2022, though we are not depending on that. In terms of long-term margins, we expect them to revert to 2021 levels, gradually increasing each year until 2027, with the growth primarily being organic, aside from the mentioned contributions from M&A in growing solutions and phosphate specialties.

Thank you very much.

When you think about M&As, especially on the agricultural side, it can come by one of two ways: either portfolio or geographies or both of them. So we speak a lot about portfolio, but we also have massive plans regarding geographies, and it might be that we will opt to shortcut and do some M&As in order to support geographies as well. So, bear that in mind; with the new five-year plan, we are definitely looking and we're exploring all directions as long as it's synergetic and we can add value to the acquisition—not an acquisition per se.

Perfect. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Kyle Caunt from Citi. Please go ahead.

Hi. Sorry, I’m on mute. Firstly on your specialties guidance $1.6 billion this year, $1.1 billion next year. Can you give us an idea on the bridge breakdown between the different specialties divisions? That would be great. And then my second question on the flip side, obviously, that implies a commodities contribution of $1.1 billion to $1.3 billion. What is your potash ASP that you're baking in to arrive at that guidance? Thank you.

Okay. So, like I said before, when you look at industrial products, then we're looking at numbers that are almost identical to 2021, with the exception that the seasonality will be different given that we're starting the year with a slow start, so the second half will be higher. On specialty phosphates and growing solutions, we will see a growing trajectory through the year, but we'll revert to the 2021 margins for the year. So that's the way to think about specialties and that's how we got to the $1.1 billion, which is a conservative estimate for the modeling that I just talked about. Again, some of the upside will come in the second half of the year, because of industrial products. On commodities, the way to look at it is that if you consider the fourth quarter, $700 million of EBITDA, and you multiply that by four, you get to $2.8 billion for the year. Given that we expect a couple of hundred million in upside on specialties that means we got to the upper side of our guidance. You need to take out about $600 million, which reflects the downside on commodities and, of course, about 80% of that comes from potash. So you get to close to the $500 million number for the sales price of potash.

That's great. Thank you.

Thank you.

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

Do you hear me?

Now, we hear you.

Yes.

Okay. I have a few questions. The first one is technical. I'm confused by your specialties' guidance for 2023. If I look at Slide 23, you say that specialties was $1.6 billion EBITDA for 2022, correct, Slide 23?

Yes. $1,573 million, if I remember correctly.

But when I add up the three segments, right, growing solutions, phosphate solutions, and IP, I get to $2.1 billion EBITDA, which is what you're saying in several places is specialties. Is there some part of those three businesses? Like, are you excluding phosphate commodities?

You’re adding the phosphate commodities. You have all the details in our press release.

I do. So, can you just bridge me the $2.1 billion to the $1.6 billion, why is the $500 million coming out of? Can you bridge that to me, please?

Phosphate commodities. It's in the phosphate solutions business. Yeah, it's just phosphate commodities.

I can do that for 2022, if you want to or we can do this offline.

I just want to clarify my understanding. Regarding the potash segment, you mentioned that pricing might average around $500 in 2023. What can we expect in terms of volume for the potash segment? What level of production can you achieve from the different assets?

We're expecting production of about 4.8 million tonnes and we're assuming sales of 4.8 million tonnes. We do have some capability to go down on inventory and go up to 4.9, but in terms of modeling, we modeled 4.8.

And then you get to what, 5.1, 5.2 by 2024?

Not by 2024. We get to 5.1 by 2026.

We are approaching contract season for potash, and I'm curious about your insights on the Indian contract. We know you typically follow the larger potash contracts settled by the buying consortium in China and other players in India. Do you think the settlement will come from Belarusian sources, with different pricing tiers from other suppliers, or might Canpotex take the lead this time? While I understand this is speculative, what are your thoughts on how the potash contracts might unfold in the next couple of months?

I think it's going to be settled soon.

And that's your guess on that?

That's all I can say at this point.

Okay. Okay. I'll pass it on. Thanks a lot.

Thank you, Joel.

Thank you. Our next question, one second please, comes from the line of Vincent Andrews from Jefferies. Please go ahead.

Hey, guys. This is Will Tang on for Vincent. Can you hear me?

Yes.

Okay. Yeah. This is Will Tang on for Vince. Just one quick question; you guys called out elevated inventory levels at the end of 2022 in industrial products. Was that a comment specific to the flame retardants business or something broadly characteristic across all your end markets there in all your product categories?

Are you talking about our inventory?

Yes. I think all I heard was elevated inventories at the end of 2022.

Okay. So our inventory levels in recent years have been tracking between 26% to 28% of sales. We finished the year with 27.1%. In terms of where we see a higher inventory at this point, we see a higher inventory in industrial products, and again, because some of the flame retardants, some of our customers are stocking down. There's always a balance when you reduce production and reach lower efficiencies versus how much it costs to hold inventory. In our case, it's better not to stop production or to produce the inventory that we're sure we can sell. So in industrial products, the level of inventory we have is higher than we would probably like, but it's not unusual given the circumstances. Our other businesses were pretty much where we need to be in the phosphate specialties, where a major supplier had a force majeure situation, which also caused us to have inventory a little higher than we'd like at the end of the year. So we have two divisions that have higher inventory at the end of the year than we'd have liked. But at the same time, we're well within our range, which again is 26% to 28%, actually 26% to 28.5%. We had in 2018, and we're at 27.1% now, so we're still in a healthy place.

Just to add if I may that we have detailed plans in place to reduce that actively in every place where we have surplus inventory. It will probably take us anywhere from one to two quarters, maybe a little bit more than that. But we'll get it back in line. I think the typical phenomena that stems from what happened in 2022 and the sharp differences that we are seeing these days.

Got you. And then I guess just a quick follow-up if I may. Going back to an earlier question on your value-over-buying strategy there, buying down 30% in industrial products. Is that characteristic of the sell-through of the entire bromine market? Or is there somebody there who's taking share from you guys on the back half?

Our position in the market is that we have no problem increasing market share. However, the price we pay is the price level. So we try to be disciplined about the way we make decisions. In some products, there's very healthy demand. I mentioned the clear brine fluids. There are even some products that usually we don't sell very well now that are suddenly in demand, like a product that treats mercury emissions coming from coal. That's a product that actually was not very successful in recent years given that coal was almost outlawed. But now, given the energy crisis, there’s new demand. There's always some business doing well. Fundamentally, the most significant influencer in the foreseeable future is the electric vehicle industry, and we're very confident of the positive trajectory there. So seasonally, we always increase inventory in the fourth quarter other than maybe the one time last year because of the reasons I mentioned. It’s not out of the ordinary to have higher inventory at the end of the year in the bromine-related product.

And looking forward to a rebound on the electronics side, which we believe according to our discussions and experience that is coming, as well as some more inventory around the phosphorus side, which should see a rebound in housing as interest rates start to come gradually down. So basically, this is an issue that we are totally aware of, and we're working through it, and it should sort itself out. That's the bottom line.

But on electronics, it's going to take a couple more months. On construction, it will take much longer because the cycle there is longer. Hope that answers.

Yep. That's perfect. Thank you.

Thank you.

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

Okay. So it's the end of the year for all of you guys as well. So thanks for being with us this year. Thanks for sharing your questions and listening to us. Thanks for allowing us to report. Thanks for believing in what we're doing. When you believe in what we're doing, we're very confident about the long term plan that we took upon ourselves a few years ago. We've been successful in executing in the recent five years and we're even more confident about the next five years. We kept even faced with lots of luck that we had this year. We kept our expenses intact. We were disciplined. We continue to be disciplined. We don't take ourselves too seriously, and we execute, execute, execute and we're looking forward to reporting back to you our first-quarter results. Thank you very much for being with us and have a great rest of the day.

Thank you.