Good morning, ladies and gentlemen, and welcome to the ICL Second Quarter 2025 Earnings Conference Call. This call is being recorded on Wednesday, August 6, 2025. I would now like to turn the conference over to Peggy Reilly Tharp, Vice President of Investor Relations. Please go ahead.

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 conference 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 will be available shortly thereafter. Earlier today, we filed our reports and our presentation with the securities authorities and the stock exchanges in both Israel and the United States. Those reports, as well as the press release and our presentation, are also available on our website. Please be sure to review the disclaimer on Slide 2 of the presentation. 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. Elad Aharonson, followed by Mr. Aviram Lahav, our CFO. After the presentation, we will open the line for a Q&A session. I would now like to turn the call over to Elad.

Thank you, Peggy, and welcome, everyone, to our second quarter 2025 earnings call. The past few months have been uncertain both globally and here at home in Israel. While there has been a great deal of noise in the global markets, we delivered the second quarter in line with our expectations. If you will please turn to Slide 3 for a brief overview of the quarter. Sales were $1.832 billion. This amount was up approximately 5% year-over-year and 4% on a quarterly basis. Specialties-driven sales of $1.496 billion were up 8% versus the prior year. When compared to the first quarter, these sales were up 6%. Consolidated adjusted EBITDA was $351 million, while Specialties-driven EBITDA was $259 million. Both amounts were down slightly on a sequential basis. In the second quarter, adjusted diluted earnings per share were $0.09. This was in line with our first quarter results. Operating cash flow of $269 million was up more than $100 million over the first quarter. In general, market pricing trends continue to gradually improve in the second quarter. Also, the majority of the end markets we serve maintained consistent trends. In agriculture, fundamentals remained relatively stable. However, sentiment varied by region. Let's start with the review of our divisions and begin with our Industrial Products business on Slide 4. For the second quarter, sales of $319 million were up slightly year-over-year. EBITDA came in at $69 million as higher prices for most products were not able to offset lower volumes and a shift in product mix. However, this performance was in line with market expectations. In general, bromine market prices continue to trend upward in the second quarter, although there have been price fluctuations from time to time. For overall flame retardants, sales were down slightly in the second quarter. Sales of phosphorus-based products improved on both higher volumes and prices. This follows the implementation of recent antidumping measures in the United States. Bromine-based flame retardant sales were down, as higher prices were not able to offset lower volumes. In addition, the construction end market remains soft. However, other end markets demonstrated good strength. Our clear brine fluid sales to the oil and gas industry improved on higher volumes in North America. However, I would remind everyone that drilling operations are somewhat seasonal in nature and generally more weighted towards the first half of the year. For Specialty Minerals, we remain focused on research and development. These efforts have helped us to create a variety of new products across a wide array of end markets, including textiles and water treatment, among others. To wrap up Industrial Products, this was a stable quarter, and we would expect similar trends for the rest of the year. Now if you will turn to Slide 5, and our Potash division results for the second quarter. Sales were $383 million, with EBITDA of $115 million. Our average potash price for the second quarter was $333 CIF per ton. This amount was up 11% when compared to both the second quarter of last year and the first quarter of this year. Potash sales volume were 971,000 metric tons in the second quarter versus the previous year; sales were down more than 180,000 metric tons. During the quarter, we faced both one-time and ongoing items. In addition to the planned maintenance shutdown at the Dead Sea in April, we also faced challenges related to the 12-day war with Iran in June. These were in addition to other ongoing war-related issues. As you know, we have had call-ups for duty at times over the past 22 months. This has put pressure on our operations in Israel, especially in terms of maintenance. Nonetheless, we have remained resilient and have faithfully continued to deliver product to our customers. We have creatively and successfully managed each and every roadblock we have encountered, and we will continue to do so. We have also continued to maximize the profitability of our potash resources. Whenever possible, we prioritize supply to the best global market, which was Europe in the second quarter. This strategy remained in place even as we continue to supply approximately 100,000 metric tons to China and India. Those tons were at 2024 contract rates, which were $73 and $70 lower than the new 2025 rate of $346 and $349, respectively. We expect to deliver a final 40,000 tons to China and India at the lower 2024 rate in the third quarter. Turning to Slide 6 to our Phosphate Solutions division, where strong second quarter sales of $637 million were up 11%. EBITDA was $134 million in the quarter and down versus prior year. While volumes were generally higher, prices were mixed for commodity and specialty phosphates. Commodity phosphate prices benefited from favorable weather conditions across most key markets and as China continued to restrict exports. Specialty phosphate prices remained under pressure due to excess supply in the market. In addition, raw material costs, especially sulfur, increased in the second quarter. However, both of these events were expected. For food phosphate, overall sales were flat with lower market prices. However, we experienced good growth in two of our target markets: dairy protein and plant protein. Industrial phosphates and battery materials both delivered sales growth in the second quarter. While our industrial phosphates are produced globally at regional facilities, we currently produce phosphate materials for batteries at our YPH joint venture in China. In the second quarter, YPH benefited from both higher prices and volumes. The team also delivered record production of MAP. As a reminder, our YPH operations serve both phosphate commodities and specialties and also our Growing Solutions business. The production there is interchangeable, and the team does an excellent job of optimizing its resources based on market prices and demand. This brings us to our Growing Solutions business division on slide 7. Strong second quarter sales of $540 million were up 9% year-over-year. EBITDA of $56 million improved 24%. For both metrics, we delivered annual and sequential improvement as our strategy has taken root. In North America, sales were up year-over-year. We saw higher volumes and profitability across the U.S., Canada, and Mexico despite a challenging agriculture economy. Sales in Europe improved as higher prices offset lower volumes. In Asia, gross profit improved even as sales were in line with the prior year. For both Europe and Asia, an increase in Specialty Agriculture products drove improved product mix. Overall, Specialty Agriculture sales increased with higher volumes in most major regions. In Brazil, sales increased on higher prices in the second quarter, but gross profit decreased with exchange rate fluctuations and as foliar fertilizer sales were lower across the entire market. However, for the third quarter, we are already seeing a better mix of foliar demand and believe we are ahead of the market. Our recent acquisitions are contributing to the overall success of Growing Solutions. This includes Lavie Bio, which has fully integrated into the business. We have also continued to advance innovative new products, and we have launched fresh marketing and outreach programs. These campaigns embrace digital and are uniquely targeted to their respective regions. And with that, I would now like to turn the call over to Aviram for a brief financial overview before I share an update on our guidance.

Thank you, Elad, and to all of you for joining us today. Let us get started on Slide 9, with a quick look at some key market metrics. Inflation generally decreased, excluding Brazil, which saw another 30 basis points increase. Brazil also saw an increase in its interest rate, up approximately 75 basis points, while most major countries saw stable to freezing rates. Global industrial production growth was 3% in the quarter, but it is forecasted to ease going into the back half of this year. U.S. housing starts in the second quarter decreased approximately 2.5%, but were roughly in line with the second quarter of 2024. Turning to Slide 10 and some key fertilizer market metrics. As a reminder, these are not only relevant for our potash business, but also for Growing Solutions and Phosphate Commodities. In the second quarter, the Growing price index was down slightly on a sequential basis, about 3% as corn, rice, and wheat all saw low to mid-single-digit decreases, while soybeans were up roughly 3%. The year-over-year decrease was more significant, down approximately 17%, with rice, soybeans, and wheat all down double digits, while corn improved approximately 2%. On a monthly basis, farmer sentiment has been choppy, reaching a four-year high of 158 in May before ending the second quarter at 146 in June. The shift in sentiment was primarily attributable to a change in future expectations as fewer producers expressed optimism about future agricultural exports. Despite the June decrease, the index remained well above the second quarter of last year. However, I must remind you that this metric represents just the United States. And as we know, farmer sentiment can vary dramatically around the world as it did in the second quarter. Potash and phosphate prices both increased sequentially and versus the prior second quarter. On an annual basis, potash was up approximately 7% year-over-year, while phosphate was up more than 20%. In the second quarter, ocean freight rates increased slightly on a sequential basis, but were down nearly 30% versus the second quarter of last year. As you will see in a few slides, ICL continued to see lower transportation costs in general in the second quarter. Turning to Slide 11 and some market indicators more relevant to our Industrial Products and Phosphate Solutions businesses. Let us start with Chinese bromine prices, which have fluctuated since the end of the first quarter but trended upward in July. As you know, our bromine solutions are used in many everyday consumer durables, including appliances, electronics, automobiles, and furnishings. Even though the consumption of durable goods for May trended down about 2% from the end of the first quarter, it improved approximately 4% versus the second quarter of last year. While we discussed phosphate prices on the previous slide, I would like to show you the same data in relation to sulfur prices since this is a key raw material for our Phosphate Specialty products. As you can see, while these two commodities track each other, the increase in sulfur prices over the past quarter and year is significantly higher than the increase in phosphate prices. On a sequential basis, sulfur prices are up more than 50% and up nearly 250% on an annual basis. Similar to our bromine solutions, our phosphate specialty solutions are an important part of many end markets, including food and beverage. Consumers in just the U.S. alone spend more than $2.5 trillion on food and beverages annually. The food category accounts for nearly 13% of America's total expenditures, making this a key end market to track. If you will now turn to Slide 12 for a look at our year-over-year sales bridges. For the second quarter, sales came in at $1.832 billion, up approximately 5% versus last year. On the left side, you can see the change for each of our business divisions, with all excluding potash demonstrating growth. Turning to the right side of the slide, you can see a $94 million benefit from higher prices this quarter, which was partially offset by lower volumes. On Slide 13, you can see our second quarter EBITDA of $351 million, which was down versus the prior year. Similar to sales, we saw higher prices and lower volumes. However, we also saw a significant increase in raw material costs. But as I already mentioned, our transportation costs improved in the quarter. Others, which had a $75 million impact, is comprised of several things, including maintenance and production quantities. Please note that in addition to the maintenance of the Dead Sea, we also completed significant maintenance at our facilities in Rotem, Israel, and in China. Turning to Slide 14, an updated look at some of our leading positions in terms of cost, quality, and price. For 2024, we remained one of the most cost-efficient potash producers. As you can see on the top left-hand side of the slide, we also have a strong track record in terms of average realized potash price, as you can see on the bottom left. On the right side of the slide, you can see ICL's leadership position in the global bromine market. As I just mentioned, bromine prices appear to be showing a gradually improving trend, and the Dead Sea remains the most cost-competitive and efficient source of bromine, accounting for approximately two-thirds of global supply capacity. If you turn to Slide 15, you can see how our global business looks on both a divisional and regional basis. For the second quarter, Europe represented approximately 31% of sales, with Asia at 22%, while South America also came in at 22%, and North America represented 20% of total sales. Before I turn the call back over to Elad, I would like to share a few highlights on Slide 16. Our balance sheet remains strong, and we ended the quarter with available resources of approximately $1.5 billion. Our net debt to adjusted EBITDA rate at quarter end was 1.5x, and we delivered operating cash flow of $269 million, a sequential improvement of more than $100 million. We extended our debt past 2030, with a successful offering of approximately $235 million, and S&P reaffirmed our BBB- credit rating with a stable outlook. In terms of currencies, the shekel has continued to strengthen versus the U.S. dollar. As we do business in dollars, this has resulted in higher expenses. Once again, we are distributing 50% of adjusted net income to our shareholders, which translates to a total dividend of $55 million this quarter, resulting in a trailing 12-month dividend yield of 2.6%. In the quarter, we maintained our consistent and disciplined approach to capital allocation and also remained focused on cost savings and efficiency efforts. And with that, I would like to turn the call back over to Elad for a review of our guidance.

Thank you, Aviram. If you will turn to Slide 18, I would like to update our 2025 guidance. For our Specialties-driven businesses, which include Industrial Products, Growing Solutions, and Phosphate Solutions, we continue to expect EBITDA to be between $0.95 billion and $1.15 billion in 2025. For Potash sales volumes, we now expect this to be between 4.3 million and 4.5 million metric tons. This amount reflects the production impact at the Dead Sea, primarily due to ongoing war-related issues. It also includes some impact from the brief war with Iran in June, which has concluded and been resolved. We continue to expect our effective annual tax rate for 2025 to average out to approximately 30%. As in the second quarter, we will still be fulfilling a small amount of our 2024 annual potash contracts with China and India in the third quarter. Additionally, we have not made any guidance concessions for potential tariffs. However, we continue to pursue mitigation efforts. All in all, third-quarter trends should improve versus the first half of the year. For Slide 19, I want to briefly remind you of a few areas we are focused on this year. There has not been a shift in ICL's overall strategy. We will continue to drive growth in our Specialty businesses. We will also continue to maximize our potash sales volumes by prioritizing the best markets whenever possible. We will drive cost savings efficiencies and also look for operational enhancements. However, I must point out that we expect to see continued higher operational costs due to the ongoing war-related issues. Innovation and new products will remain key to ICL's future growth. However, we will also pursue complementary M&A activities. And as I just mentioned, we will continue to monitor the global tariff situation. While there were some challenges this quarter, especially in Israel, my colleagues remain steadfast. I would like to thank all ICL employees around the world for another good quarter. Also, I would like to note that ICL was once again rated as one of the Top Places to Work in Israel, Brazil, and St. Louis. I'm pleased that our employees have recognized ICL with these honors. And with that, I would like to turn the call back over to the operator for Q&A.

Your first question comes from Ben Theurer with Barclays.

So the first one is really just about the Potash business and the implications and what you saw in the quarter. On a year-to-date basis, you're running at about 2.1 million tons, if I do the sum right from 1Q and 2Q. The first question really is that decrease that you saw in the second quarter, that is essentially everything that kind of like lowered the guidance for the year. There's nothing on top of what you've currently been expecting versus your previous expectations because it feels like it's just that, but I want to make sure that there's nothing else that you're accounting for in the second half. That would be my first question.

No, thank you very much, it's great to talk to you again. As you know, we are very cautious with our guidance, and this is based on a thorough analysis. It became evident in the second quarter that while we can meet our plans moving forward on a marginal basis, catching up is no longer feasible. We will not be able to maintain the 4.5 to 4.7 framework, so we adjusted our guidance downward, with the midpoint decreasing by about 200,000. Reflecting on the second quarter, it was a culmination of a significant situation, though we had already been experiencing ongoing challenges, particularly at DSW, which has resulted in a manufacturing gap. The positive news is that we are narrowing this gap and anticipate better alignment with our initial goals for the second half. While things are not yet perfect, we are not encountering the same shortfalls as earlier this year or in Q2. This guidance represents our best assessment and is reflective of what I have described. Additionally, regarding Potash, which constitutes about 20% of our total production, we faced some localized challenges in Spain, but we are addressing them. We expect the second half to improve somewhat, though overall, we will fall slightly short of our initial expectations for the year. These aren't significant numbers, but I wanted to clarify the situation. The guidance covers both DSW and Potash.

Got it. And then, Growing Solutions, I just want to follow up on that. I mean, we've seen it already kind of like a starting trend in 1Q with top-line growth posting top-line growth, but even better profit growth and kind of like felt like it further accelerated into 2Q. So I just want to understand, first, what's been driving the positive jaw here that EBITDA is growing at a significantly higher rate than sales. As we look into the back half and, well, the half, but particularly maybe 3Q for now, you probably have a little bit more visibility. How should we think about that relationship between top-line versus EBITDA growth going forward, just given that the comps are getting a little tougher in the second half than what they were in the first half?

So yes, we saw another good quarter for Growing Solutions. And I would say it becomes a trend. I hope it will continue like that. Overall, the price environment in the fertilizer business is relatively good, so that helps, of course. What you see is a change in mix. And within the Growing Solutions wide portfolio, we see higher sales of the more sophisticated, more Specialty fertilizers and a bit less of the less specialty fertilizers. So I think the combination of the different mix and a bit higher prices bring us better profitability. But just bear in mind that the Growing Solutions and the agriculture sector, it's about seasonality. So now it's the end of the season in the Northern Hemisphere, and we are starting the season mainly in Brazil for us, which usually comes with even better prices and profit. I would expect Q3 should be, for sure, not lower than Q2.

If I may, Elad, just to resonate about Brazil. Brazil, I guess, Ben and everybody, as you know, is the most important single country in the world of agriculture. The third and the fourth quarters are the main quarters for Brazil. At this time, Brazil has got huge potential but also some issues that we need to be very careful about, and we are. One is that there is a significant liquidity issue in the Brazilian market. It's a known phenomenon. It's been going on and off for years. At this stage, it is definitely there. The second thing which has a relationship to it is the very, very high interest rate, which the Bank of Brazil is holding. It's about 15%, and they upped it in Q2. The inflation is about 5%, which means that the real interest rate is about 10%. The Central Bank of Brazil is acting as a contra measure to the way Lula is running the country, and they needed to react quickly. If you remember, the Real was completely losing strength against other currencies at the beginning of the year, and they acted accordingly, which means that this is another action item. The last thing, which to us, we don't believe is a big thing when we look at the mix of products that we do and the mix of crops that we cater, but there is an ongoing issue between Brazil and the U.S. Trump, for his reasons, currently, is still no arrangement and is talking about a 50% duty. This is another action item that potentially can, to some extent, interfere with all the good things happening in Brazil. This is not particularly for ICL; this is universal for doing business in Brazil, and I'm sure it will affect and affect all the companies that are in our space. So that's just to round off and complete the picture there.

Your next question comes from Laurence Alexander with Jefferies.

This is Kevin Estok in for Laurence. I've been hearing from peers that there are some global indications, particularly in Brazil but to a lesser extent elsewhere, that high fertilizer prices may be impacting demand. There seems to be a noticeable decline in demand attributed to weaker farmer economics than anticipated. I was wondering if you are experiencing similar trends on your side.

What you mean the demand destruction? I'm sorry, I'm not sure the line was... Yes.

Yes.

The demand destruction. When there is an imbalance in markets, there's always the risk or occurrence of demand destruction. Currently, in the agricultural market, agricultural commodities like rice, wheat, corn, and soy are not performing well, experiencing fluctuations. Additionally, fertilizer prices, particularly for potash and especially phosphate, are moving in a different direction. This indicates that these trends require monitoring. We observed this situation in 2022 and know how the dynamics played out. Focusing on ICL, in the phosphate sector, we are engaged in both commodities and specialties as it's a specialty-driven business. We find that whatever we produce, we are able to sell at good prices, and I believe this will continue. As we analyze the outlook for phosphate for the remainder of the year, this seems to be the prevailing situation. While there is some demand destruction, it does not translate into a lack of demand for ICL. In the Potash market, we observe a reasonable equilibrium between supply and demand. The key point for us is that we are limited by our production pace, with no significant inventory—just some frictional inventory. We are confident that whatever we can produce in Israel and Spain will sell at the current price levels. There have been analyses suggesting that potash prices may not rise significantly. However, we expect to see better effective prices as we continue to meet our obligations, and this should become less of an issue moving forward. In conclusion, while there may be some demand destruction, I don’t believe it will significantly impact ICL.

Understood. And then just as a second question, I mean, so construction end markets are obviously pretty weak. I was wondering what you think would take to turn those end markets. And I was wondering if you're seeing any green shoots in any of the regional markets anywhere?

That's a very good question. Before I focus on the construction market, it's important to take a step back and consider what's happening globally in production, manufacturing, and sales. The key term we need to acknowledge is volatility. If we reflect on the second quarter we just completed, we experienced the significant event of Liberation Day in early April, which caused considerable disruption in global markets. There have been some delays and differing resolutions across countries, leading to disruptions in end markets that affect the supply chain. Additionally, consumer confidence is an issue we're witnessing worldwide. There's also the potential for inflation. When we analyze all these macroeconomic factors collectively, it has implications across many industries globally. Specifically regarding the construction market, the main regions of focus are the U.S., Europe, and China, each having its unique circumstances. In the U.S., home prices are high while new construction remains low, which affects demand. I don't anticipate any significant changes in the short term. The market is lukewarm—not great, not bad, but stagnant. Europe is facing a similar scenario, with various countries experiencing different conditions, but overall, there's no clear trend. In China, construction issues are ongoing. There has been excessive construction, inflated pricing, and many problematic loans. I believe it will take China a while to resolve these construction challenges. These conditions affect our operations as we navigate a market with soft demand. Despite this, we're performing reasonably well in our industrial products, as reflected in our results, and we expect to maintain this performance. However, we do not foresee any surge in demand that would lead to outstanding results in the near future, certainly not this year.

Your next question comes from Joel Jackson with BMO Capital Markets.

Just on the short term, if you look at Growing Solutions and IP, can you talk about how each business individually, so Growing Solutions and IP, should look in Q3 versus Q2? Maybe the puts and takes for each business, please?

For Growing Solutions, I think the main difference between Q2 and Q3 is which continent or geographical area is more dominant. In Growing Solutions, Q3 will be dominated by the Brazilian market. Usually, this means higher profit, but again, we need to see what happens in the Brazilian market. All in all, Q3 should be a relatively strong quarter for Growing Solutions. As for IP, we see that the bromine prices are going slightly up. The demand is still soft. Again, it depends on which end market; Aviram talked about construction. On the other hand, oil and gas is doing a bit better, but there is some seasonality element in oil and gas. I don't believe we'll see any drama in IP in Q3. So all in all, relatively the same for IP in Q3 versus Q2.

Q4, I think, Joel, to wrap up at this point will be very similar. What we are seeing is that IP and GS will most probably be tracking plus/minus along the numbers that we've seen in Q2. That is our forecast, of course, with all the caveats and all the things that we said before. The main difference in Q3 versus Q2 should come from the potash side.

In Potash, I believe we see a higher price per ton first because we move to the 2025 contracts in China and India, but also the spot transactions are at better prices, and I believe the quantities will be up. So all in all, in potash, we expect a better quarter in Q3.

Remember, Joel, about a month ago, you asked me about Q2 and the effective prices, and we spoke about the old contracts that we still needed to honor; most of them are gone. This means that effectively, our price in Q3 will be better than that, and the quantity should be better as well. This will hopefully show a jump in the results we are delivering in the potash segment of our business.

Okay. So let's talk a bit more about potash. Do you think the price increase in Q3 versus Q2 will be similar to the price increase you saw in Q2 versus Q1?

It's difficult to predict, but my best guess is that we'll see an average increase of $10 to $15 per ton. This is just an estimate. In Q2, the average was $333 per ton, and I think Q3 will be slightly better than that increase. I'm referring to ICL specifically.

I understand all the challenges; inventories used to be low, even lower. How low are you willing to take inventories? To reach, let's say, your midpoint of 4.4 million tons of sales, are you willing to have inventories drop to 50,000 tons at the end of the quarter? How low are you willing to go?

No, no. I don't think we'll go lower than what we have right now because that's the operational inventory; you cannot run the business much lower than this. So you should not expect any lower inventory, for sure, not dramatically lower.

Does that mean you're more likely to come in at the lower part of your 4.3 million tons to 4.5 million tons potash sales range? You've given a midpoint of 4.4 million tons, but are you more likely to come in at the lower half of it?

We don't know yet, Joel. That's the truth. We open a range when we open a range; we do this with this spread because we do not know. A lot of it depends on how fast we're going to ramp up and how quiet or not quiet our particular part of the world is going to be. There are a lot of unknowns. We can argue the case for both sides at this stage. So we really do not know, and we cannot respond to that at this point.

Okay. My follow-up question is, Elad. It's a little more personal for you. You've been in this seat now for a handful of months, not a lot, but you've been there for a little while now in this seat. You talked about, I think, earlier in the call about maintaining the goals around the different things. As you now sit in the seat, what might ICL do differently under your leadership than say Raviv? Are there some things, some ideas that you have? Maybe you could share your initial thoughts here about things you may do a bit different than Raviv. You've already talked about doing a lot of what you did, but what Raviv and the team has done, but I think you get my question.

Yes. So it's very tempting to answer this question. But please give me another quarter as I promised last time before the end of the year; I will share with you. We are working now on reviewing the strategy and the roadmap. So please, if you can wait a bit, I promise I'll come back to the market with an accurate plan and clear program for the future.

There are no further questions at this time. I will now turn the call over to Elad for closing remarks.

Thank you, everyone, for joining us today. All in all, from our perspective, Q2 met our expectations, and it was a good quarter; we anticipate Q3 to be even better. We'll meet you in the next quarter. Thank you very much.

Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.