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'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 specialty-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 the 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 delivered quarterly sequential improvement in operating cash flow of $316 million and free cash flow of $175 million, up 8% and 19%, respectively. Let's start with a review of our divisions and begin with our Industrial Products business on Slide 5. For the second quarter of 2024, sales were $315 million with EBITDA of $74 million. While sales were up 5% year-over-year, they declined slightly, as expected, versus a seasonally strong first quarter. Industrial Products EBITDA improved sequentially for the third consecutive quarter. During the quarter, we continued to prioritize cost savings and efficiency efforts. We achieved higher capacity utilization and were able to increase market share despite end-market demand remaining mixed with softness in electronics and building and construction lingering. Sales of clear brine fluids for use in the oil and gas industry declined year-over-year due to weather and a shift in oil rig schedules. We maintained our focus on expanding customer relationships and long-term partnerships, and we are now introducing new phosphorus-based solutions in North America and Europe. We are also expanding customer trials for FruitMag, our specialty minerals solution for post-harvest citrus fruit treatment into China, one of the world's top citrus producers. On Slide 6, you will see our potash division results for the second quarter of 2024 with sales of $422 million and EBITDA of $118 million, both relatively in line with the first quarter. Total sales volume was down 108,000 tons year-over-year but up sequentially due to annual maintenance in the Dead Sea in the first quarter of this year. We also experienced some shipping-related issues as the events in the Red Sea present a challenge for ICL as well as for other global companies. Regardless, we have been able to deliver our quantities by adjusting delivery destinations to some extent and, when necessary, our shipping routes. In Spain, we saw continued improvement and remain on track to meet our 2024 production and cost savings goals. Cost per ton has improved, and we are also seeing benefits from shifting our efforts to a higher-grade mineral location. In total, the average potash price declined in the second quarter to $300 CIF per ton, down approximately 26% year-over-year and 7% sequentially. Turning to Slide 7, in our phosphate solutions division, where second quarter sales of $572 million and EBITDA of $146 million both increased on a year-over-year and quarter-over-quarter basis. EBITDA margin increased 26% and improved versus both prior periods. Our phosphate specialties are ahead of plan for 2024, with sequential quarterly improvement as our food strategy continued to deliver strong results. For the second quarter, we saw exciting double-digit year-over-year growth in our alternative dairy-based beverages. We also expanded our capacity in China to meet growing customer demand for our food specialty solutions with our new food ingredients plan. Also in China, we continue to reach new production records and to improve efficiencies as we strive to meet customer demand. Our growth trend in that country continued with higher battery materials volumes in the second quarter. For our North American battery materials expansion, we expect our customer innovation and qualification center to be operational in St. Louis by year-end. We already have customer interest in recent R&D advancements we have made, including the use of rapidly developing process technology with improved pallet density and high-performance electrochemical properties, and we will be able to qualify new products at our customer innovation and qualification center by the end of the year. For our commercial LFP plant in North America, we are evaluating alternative incentive opportunities and also more actively and conservatively managing our construction schedule and capital expenditures to match anticipated customer demand timelines. This is expected to push commercial production to a later start, more in line with most of our customers' requirements. Turning to Slide 8, in our growing solutions business division, where second quarter 2024 sales of $494 million were up both sequentially and year-over-year. EBITDA of $45 million also improved versus both prior periods. We continue to target the very specific needs that growers have in different regions and responded with innovative new products designed for each individual market. On a regional basis, we were able to increase market share in the key and growing markets of Brazil, China, and India by expanding specialty fertilizer distribution. In North America, we continued growing our specialty plant nutrition footprint with the acquisition of Custom Ag Formulators, a provider of liquid adjuvants and enhanced nutrients as well as various other specialty products. This latest acquisition advances our goal of targeting opportunities to expand our growing solutions product offerings and to position the business for further growth in new and adjacent end markets. I would like to wrap up with a few highlights on Slide 9. I'm pleased we were able to deliver our third quarter of sequential EBITDA improvement as we continue to build momentum by focusing on the areas under our control and achieving against our strategy. To that end, we were able to increase market share for our specialties-driven business divisions in key regions as we remain committed to growing our leadership position for these three businesses. One way of achieving this goal is via acquisition, as we did with growing solutions this quarter. The acquisition of Custom Ag Formulators was our second for 2024, and we look forward to additional opportunities. For our phosphate solutions business division, we already discussed the expansion of our food phosphate capacity in China, and we are eager to further advance our food strategy in China for China. We're also looking at new global battery materials partnerships and phosphate solutions as we seek to leverage the proficiency we have built in China and expand to other parts of our global footprint. We expect to harness our phosphate expertise and work with our global partners and customers to introduce new products as we look to become a global leader in battery materials, and we expect to begin qualifying some of this technology by year-end in North America. Along with our investments in innovation for battery materials and other areas, we continue to drive cash generation in the quarter and to target efficiency efforts. Our pipeline of innovative new products and solutions is robust, and AI is allowing us to both accelerate new product development for future growth and to achieve industrial efficiencies in the areas of cost, safety, and quality optimization. Finally, I would like to call out that ICL has once again been voted one of the best places to work in Israel, Brazil, and St. Louis by our employees. It's an honor to work with the entire ICL family of employees around the world and to experience their outstanding work, dedication, and support firsthand. And with that, I would now like to turn the call over to Aviram.

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, with a 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 in quantities, which was offset by lower prices, especially for potash. On slide 15, you can see the impact lower potash prices had on our second quarter 2024 EBITDA of $377 million. This is evident on both sides of the slide. On a quarterly sequential basis, EBITDA was up 4% with a roughly 65 basis points improvement in margin. I would like to note that while the year-over-year impact from transportation costs looks roughly flat on the slide, this excludes amounts related to the war in Israel. Even as potash prices continued to decline in the second quarter, ICL remained the leader in terms of average realized price, as you can see on slide 16. We continue to maintain the flexibility that allows us to rapidly shift in and out of markets based on profitability and to maximize our cost-efficient resources. Once again, I would like to point out ICL's position in the global bromine market, which you can see on slide 17. The Dead Sea is the premier and most cost-competitive source of bromine and accounts for approximately 2/3 of global supply capacity. If you turn to slide 18, you can get an idea of how global ICL is as a company, and we have diversified on a regional basis and continue to grow market share in high-growth countries like China and Brazil. We are also diversified in terms of our business divisions and end markets. Some say this makes the ICL story more complicated than it might be, but it also means ICL is not as dramatically impacted by swings in commodity prices. Our specialties-driven businesses are either global leaders or well on the way to becoming one, which is the case for our growing solutions business. Across our specialties-driven business divisions, we have been benefiting from increasing market share, and this is just one of the highlights on slide 19. We have also maintained our focus on cost savings and efficiencies, both across our business divisions and on a corporate-wide basis, and our year-to-date results in this area are in line with our 2024 plans. We continue to prioritize cash generation, and we ended the quarter with available resources of approximately $1.7 billion. Our net debt to adjusted EBITDA rate at the quarter end was 1.3 times. We also maintained our commitment to distributing up to 50% of adjusted net income to our shareholders, and in September, we will pay out $63 million as a dividend to our shareholders, bringing up trailing 12-month dividend yield to 4.6%. Finally, if you turn to slide 20, I would like to update you on our 2024 guidance. For our Specialties-driven business divisions, which include Industrial Products, Growing Solutions, and all of Phosphate Solutions, we now expect EBITDA to be between $800 million and $1 billion in 2024. This is up from previous guidance of $700 million to $900 million. There is no change to our previous potash guidance. Our effective tax rate for 2024 is now expected to be approximately 28%. For the second quarter, our effective tax rate was 27%, which declined versus the prior year and reflected a lower surplus profit levy, mainly due to a decrease in potash prices. And with that, we can begin the Q&A.

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

Hi. Good afternoon to you. 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, 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 a little less easier comps than what we're having now in the short term. So that would be my first question, and I have a quick follow-up.

In terms of demand, we are observing that electronics are recovering, but at a slower pace than anticipated. There is significant potential for improvement, and we are also monitoring the impact of the new AI boom and the successes of Microsoft Pilot and Microsoft Copilot, as well as the progress of electric vehicles, which is lagging behind expectations this year. However, we believe that eventually it will accelerate as predicted. The construction sector has not seen much change in recent months, which was anticipated due to its longer cycles. Overall, demand in most other industries remains robust. Electronics are still below typical levels but are showing signs of improvement. Construction is currently below normal and has not yet begun to improve. Additionally, there is nothing significant to report. In the first quarter, clear brine fluids were slightly above expectations, while the second quarter came in a bit lower than we had forecasted, which is influenced by factors such as weather issues and rig schedules. However, these fluctuations are not of major concern.

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 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 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 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 the 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 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 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 to adjust to the tougher dynamic lately?

Sure. So, LFP is increasing in market share 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 to be 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. 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, will 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 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 there yet with the prices. 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 IP second half would be quite similar to the first half.

Okay. And just one more question, if I 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 we have our calculations right, Joel, and without going into specifics, it's important to note that we have a range. You're correct that the midpoint has increased by $100 million, but we are now providing a range of $800 million to $1 billion, which is quite broad. I believe we are positioned well here, and this is very encouraging news as we are seeing positive results from all our specialty units. The breakdown is more variable, and I prefer not to dive 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 on three of our specialty businesses being 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 in 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 would rather go that way.

Okay. Thanks for answering all my questions.

Thank you. 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 volume? Can you also share how the EU duties on phosphate-based flame retardants from China have impacted the EU market?

Okay. So I think we answered that question earlier. I think Aviram 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 due to 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, 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 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 from the line of Erica 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?

We are continuing to use the port of Eilat, which connects to the Red Sea. This route now sees fewer shipments compared to before, so we are diverting some of our deliveries around Africa. While there are added costs associated with this change, we have received some compensation from our customers. The volume of exports remains unchanged. However, any shipments through the Red Sea carry the risk of attack, and many of our vessels have faced threats over the past ten months. We are grateful to the shipping companies that have supported us in maintaining the safety of our personnel, and we have been fortunate to remain safe thus far. In light of security concerns, we are reducing the volume transported via the Dead Sea, hoping that the security situation improves soon, which we believe it will. The potential long-term impact could involve some extra costs, although they wouldn't be substantial—still, it amounts to millions of dollars that we would prefer to avoid.

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

Yeah. The relevant question is because a lot of the export income comes from Israel. It's about two-thirds of the overall, and the part that is concession related is about one-third of overall profitability of the company. I hope that answers. By the way, it was about two-thirds, five years ago; two-thirds was concession related, and now it's about a little more than one-third. 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 want to thank all ICL employees and to everybody that made this call possible. Thank you very much, and have a great rest of your day.

Thank you for joining our call and discussing the quarter with us. We look forward to sharing our Q3 results with you next quarter. I want to express my gratitude to all ICL employees and everyone who made this call happen. Thank you and have a great rest of your day.