ICL Group Q3 2024 Earnings Call Transcript

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Provided by Quartr
November 11, 2024

Key Takeaways

  • Consolidated Q3 sales rose to $1.75 billion with adjusted EBITDA up 11% year-over-year to $383 million and margins expanding from 19% to 22%, driving a 10% sequential increase in adjusted EPS to $0.11.
  • Specialty-driven divisions (Industrial Products, Phosphate Solutions and Growing Solutions) delivered a 37% year-over-year EBITDA increase, reducing reliance on potash to 30% of total EBITDA versus 50% last year.
  • Average potash price declined by $45/ton CIF and volumes fell by 220,000 metric tons in Q3 due to shipping constraints and wartime logistics, leading the company to cap 2024 potash sales at 4.6 million tons.
  • ICL raised its full-year 2024 specialty EBITDA guidance to $950 million–$1.05 billion from a prior range of $800 million–$1 billion, reflecting stronger-than-expected performance in key segments.
  • The company continues investing in innovation with its North American battery materials qualification center (commercial production targeted for 2027) and its Agmatics digital Agtech platform, positioning for long-term growth.
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Earnings Conference Call
ICL Group Q3 2024
00:00 / 00:00

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Operator

Good day everyone and welcome to the ICL third quarter 2024 earnings call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask questions by pressing the star and 1 on your telephone keypad. You may withdraw your question by pressing star 2. Please note this call is being recorded and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Peggy Reilly Tharp. Please go ahead.

Peggy Reilly Tharp
Peggy Reilly Tharp
VP of Global Investor Relations at ICL Group

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 shortly thereafter. Earlier today we filed our reports and presentation with the securities authorities and the stock exchange in Israel and tomorrow, once the SEC Edgar website reopens, we will do so in the U.S. Those reports as well as the press release and our presentation are available on our website as of this morning. Please be sure to review the disclaimer on slide 2. Our comments today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Peggy Reilly Tharp
Peggy Reilly Tharp
VP of Global Investor Relations at ICL Group

These statements are based on management's current expectations and are not guarantees of future performance. The Company undertakes no obligation to update any information discussed on this call at any time. We will begin with a presentation by our CEO, Mr. Raviv Zoller, followed by Mr. Aviram Lahav, our CFO. After the presentation we will open the line for the Q and A session and I would now like to turn the call over to Raviv.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

Thanks, Peggy, and welcome, everyone. I would like to begin by providing a brief update on the situation in Israel which is now in its 14th month. We have continued to address the challenges caused by the war including fluctuations in the number of reservists called to service and ongoing logistics related issues. We remain committed to delivering against our 2024 plan while continuing to manage all areas under our control and preparing for potential external risks and scenarios. Now if you would please turn to slide 3 for a brief overview of third quarter results which continued the positive trend we saw in the first half of the year. Sales of $1.753 billion were up for the third consecutive quarter while adjusted EBITDA of $383 million was up for the fourth consecutive quarter.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

EBITDA was also up 11% on a year-over-year basis as EBITDA margin expanded from 19% to 22% throughout the first nine months of 2024. As always, we maintained our focus on cash generation. As a result, our free cash flow strengthened throughout the year with a year to date free cash flow of $572 million. Adjusted earnings per share has also improved every quarter this year and for the third quarter we delivered adjusted EPS of $0.11 up 10% on a sequential basis. In the third quarter our specialty-driven business divisions, Industrial Products, Phosphate Solutions and Growing Solutions reported a 37% year-over-year increase in EBITDA. For the third quarter our Potash business division represented approximately 30% of total EBITDA versus nearly 50% in the same quarter last year.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

We continue to return value to our shareholders via our industry leading dividend and next month we will distribute another dividend payment of approximately $0.05 per share. We also maintained our focus on expanding ICL's innovative product pipeline across all of our specialties driven businesses during the quarter. In addition to our focus on strong cash generation, we continue to target cost savings and efficiency efforts as well. I would ask you to turn now to slide four and to look at both year-over-year and quarter-over-quarter trends for some key financial metrics. As you can see, we once again delivered quarter-over-quarter improvement across the board. Consolidated Adjusted EBITDA was up on both a quarterly and annual basis and our specialties-driven business divisions achieved improvement in both sales and EBITDA versus both prior periods.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

Let's start with a review of our divisions and begin with our Industrial Products business on slide 5. For the third quarter of 2024, sales of $309 million were up 16% year-over-year. Over the same time frame, EBITDA increased 55% to $65 million. EBITDA margin of 21% improved versus 16% in the prior year when the bromine market reached its bottom. Driven by scale and efficiencies in the third quarter, we continued to reap benefits from our efforts to gain market share in flame retardants with higher volumes for both brominated and phosphorus-based solutions. Sales of Clear Brine Fluids for use in the oil and gas industry decreased year-over-year due to a normal shift in the oil and gas drilling cycles in Europe and the Eastern Hemisphere.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

Specialty mineral sales increased year-over-year driven by higher volumes for industrial applications and steady demand from the food and pharma end markets. The new product pipeline, which spans from apparel to construction and into battery materials is expected to benefit from an expansion into the North American energy storage supply chain through a phosphorus compound for use in the production of LiPF6, a critical raw material for lithium-ion batteries. On slide 6 you will see our potash division results for the third quarter of 2024 with sales of $389 million and EBITDA of $120 million. Our average potash price was down $45 CIF per ton year-over-year while total sales volume was down approximately 220,000 metric tons for the same time frame. As I mentioned earlier, at our Dead Sea operations we continue to face intermittent challenges related to the war.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

We have continued to adapt to fluctuations in staffing and remain flexible in the face of shipping constraints which present a challenge for ICL and other global companies. In Spain, we are benefiting from ongoing operational and efficiency efforts which have driven record third quarter production for 2024. We intend to limit our total annual potash sales volumes to the 4.6 million metric tons which have already been committed. This is similar to 2023 volumes and in anticipation of improving conditions in 2025. Turning to Slide 7 in our Phosphate Solutions division where third quarter sales were $577 million, EBITDA $140 million increased on a year-over-year basis while EBITDA margin expanded to 24% from 20% in the quarter. Growth in specialties market share more than offset lower prices related to a decrease in cost inputs.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

On a portfolio basis, we continue to expand into new and adjacent products in the food, industrial and pharma end markets. On a regional basis, we saw continued growth at YPH, our joint venture in China with increased demand for battery grade phosphate. We are two months away from completing our Customer Innovation Qualification Center in St. Louis which will allow us to begin qualifying battery materials products for customers. This big step forward puts us in an optimal position for growth in the Western Hemisphere as it will allow us to prove our products at scale and strengthen our customer relationships. For our commercial LFP plant in North America, we continue to align our construction timeline and capital spend to match anticipated customer demand.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

Looking more globally, we are now selling specialty phosphate solutions to a battery customer in Argentina and we're also looking at battery material partnership opportunities in Europe in terms of commodity phosphates. Prices firmed in the third quarter with tight stock positions in key markets. Turning to Slide 8 and a Growing Solutions business division where third quarter 2024 sales of $538 million were somewhat down year-over-year while EBITDA of $64 million increased more than 70% for the same time frame. EBITDA margin of 12% expanded significantly versus the prior year, driven by efficiency efforts and improved product mix. Our strategy of offering innovative products targeted to meet regional needs continued to prove itself as we delivered our third sequential quarter of sales and EBITDA growth in China. We recently signed a five-year agreement with one of the top agricultural distribution companies.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

The agreement, valued at approximately $170 million, is for specialty water soluble fertilizers, which have seen a substantial increase in demand in China. In North America, we have made good progress on the integration of Custom Ag Formulators, a provider of liquid adjuvants and enhanced nutrients, as well as various other specialty products. I would now like to wrap up with a few highlights on slide nine. While I'm pleased that we delivered sequential EBITDA improvement for the fourth consecutive quarter, our future growth relies on our passion to strive forward and to disrupt our own markets when necessary. This attitude has enabled us to continuously enhance our already robust product pipeline with innovative new solutions. Simultaneously, we have worked to manage costs and drive efficiency efforts. There are no sacred cows at ICL and two additional small sites were closed this quarter for efficiency considerations.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

We have also worked together to leverage opportunities across business segments and we will continue to do so as we look to target new and adjacent end markets through innovative product solutions. One example of this is our battery materials business. We have the potential to leverage our expertise in a variety of ways and to expand our presence as a global leader in this space through new products and offerings in North America. Our Customer Innovation Qualification Center is nearing completion and we currently expect commercial production to begin in 2027. Another example of our dedication to innovation is Agmatix, our Agtech digital startup which was recently recognized by Fortune as one of the 10 companies that are changing the world and was featured in an important scientific publication in Nature on Regenerative Agriculture.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

The new RegenIQ platform helps agronomists and suppliers implement environmentally friendly crop strategies and enables them to tailor regenerative practices to specific crops and conditions. These are just two examples that demonstrate how ICL is working to improve lives and protect the planet, and neither would be possible without the hard work, dedication and support of each and every ICL employee. To all of our team I say thank you.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

And with that I would now like to turn the call over to Aviram.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Thank you, Raviv, and to all of you for joining us today. Let us get started on slide 11 and take a look at some key market metrics. Since we are a truly global company serving a variety of end markets, we look beyond fertilizer prices to a wider array of macro indicators, starting with inflation, where the U.S. and E.U. saw decreases in the third quarter, while China, Brazil, and Israel saw increases which ranged from 20-60 basis points. Interest rates decreased versus the prior quarter in the U.S., E.U., and U.K., remained steady in Israel and India, and increased in Brazil. Global industrial production was stable in the quarter with improving trends expected into the next few quarters on a sequential basis. Housing starts picked up slightly in the U.S. in both the second and third quarters this year.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Turning to Slide 12 in key fertilizer market metrics across the board, grain prices ended the third quarter lower while farmer sentiment significantly softened. However, data for October showed a surprising pre-election bounce in sentiment as farmers expressed some optimism that economic conditions will improve and that there will not be an extended downturn in the farm economy. Potash and phosphate prices continue to diverge with potash prices maintaining their descent while phosphate prices increased slightly in the third quarter and significantly year-over-year while ocean freight rates decreased in the quarter reaching the lowest level since the third quarter of 2023. At ICL we continue to see higher overall logistical cost. On Slide 13 you can see some key market metrics for energy storage and electric vehicles.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

While both are growing at roughly the same pace over the next few years, the most significant increase in demand is still expected later in the decade. As Raviv mentioned, in addition to our current North American battery materials project which is aligned with our customers current expected production timelines, we are also looking at battery material expansion opportunities in other regions. If you will now turn to Slide 14 for a look at our third quarter sales bridges, on the left side you can see the year-over-year change for each of our business divisions with potash having an outsized impact on the year-over-year decrease in sales which came in at $1.8 billion. Turning to the right side of the slide, you can see the impact of lower prices especially for potash and the effect exchange rates had on sales.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

In addition, due to one-time logistics adjustments which will allow for greater flexibility of allocation between ports and Israel going forward, we deferred approximately 120,000 metric tons of potash sales volume to China. On slide 15 you can see the impact lower potash prices had on our third quarter 2024 EBITDA of $383 million. We were able to offset lower prices in general through higher quantities and lower raw material costs in our specialties-driven businesses. Turning to slide 16, you can see that even as potash prices continued to decrease in the third quarter, ICL remained a leader in terms of average realized price. Once again we maximize the profitability of our cost-efficient resources. Demand for potash is currently constructive due to soil replenishment needs and we are seeing some firming in the global market.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

On slide 17 I would like to remind you of ICL's leadership position in the global bromine market. While bromine prices have been under pressure for more than a year, the Dead Sea remains the most cost competitive source of bromine and accounts for approximately two-thirds of global supply capacity. If you turn to slide 18, you can see how our business breaks out on both a regional basis and business division. As a truly global company, we maintain solid foundations in Europe and North America while participating in high growth markets like Brazil, China and India. As a truly diverse company, our four business segments serve a wide array of end markets from automotive to food and beverage to pharma and beyond. Before we wrap up, I would like to share a few highlights.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

On slide 19 we continue to prioritize cash generation and ended the quarter with available resources of approximately $1.7 billion. Our cost savings and efficiency efforts are ahead of our expectations. Our net debt to adjusted EBITDA ratio at quarter end was 1.2 times and S&P recently reaffirmed our BBB- rating with a stable outlook, and of course we are once again distributing 50% of adjusted net income to our shareholders. In December we will pay out $68 million as a dividend to our shareholders, keeping our trailing twelve month dividend yield at 4.6%. Finally, if you will 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 Phosphate Solutions. We now expect EBITDA to be between $0.95 billion and $1.05 billion in 2024.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

This is up our previous guidance of $0.8 billion-$1 billion. As Raviv mentioned earlier, for 2024 we intend to limit our total annual potash sales volumes to 4.6 million metric tonnes, which is in line with 2023 volumes. In anticipation of improving conditions in 2025, we continue to expect our effective tax rate for 2024 to be approximately 28% which was our rate in the third quarter. With that we can begin the Q&A.

Operator

Thank you. At this time, if you would like to ask a question, please press star and 1 on your telephone keypad. You may withdraw your question at any time by pressing star 2. Once again, to ask a question, please press star and 1 on your telephone keypad. We'll take our first question from Rahi Parikh with Barclays. Please go ahead. Your line is open.

Rahi Parikh
Rahi Parikh
Equity Research Assistant Vice President at Barclays

Hi everyone and congrats on the results. I'm calling and the first question that we have is do you have any preliminary specialty outlook for 2025 given that 2024 is coming together much better than anticipated, initially anticipated and have.

Rahi Parikh
Rahi Parikh
Equity Research Assistant Vice President at Barclays

A follow-up for after.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

That. Okay, so as you can imagine, first of all, hi, how are you? And I hope we get to touch base. We have, yeah, we do have preliminary thoughts about 2025. It hasn't firmed up. That's the budget for 2025. But we definitely, I mean the ideas and the assumptions for 2024, if I go industry by industry would suggest that we see basically further stabilization or firming up around the potash. Starting from that, hopefully continuation of the good track record that we have on phosphate and its derivatives on industrial products. As you know, a lot of it depends on the market side and the demand that's going to firm up. We believe that during the year demand should be picking up. We are not waiting for the demand, as you know, we are supplying basically at full steam, but this should drive prices up.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

And finally, on the growing solution side, we're hopeful that we continue the very positive journey that we embarked upon and 2025 is going to be a better year there. So again we're going to work on it. We don't have a version that we're ready to share at this time, but the trends basically look okay. Anything I missed, Raviv?

Raviv Zoller
Raviv Zoller
CEO at ICL Group

[crosstalk] No, that's.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Perfect. Okay, so that's 25. Of course, once we have a better picture, as always, we'll find a way to share it, and it will culminate in the guidance that obviously we will give when we come out with Q4 and 24. We will also, of course, give a guidance for 2025 as we did in the previous two

Aviram Lahav
Aviram Lahav
CFO at ICL Group

years.

Rahi Parikh
Rahi Parikh
Equity Research Assistant Vice President at Barclays

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

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Okay, so thanks for the question. Geopolitics, of course, nobody has a crystal ball but the main issue for us is logistics and shipping and during the third quarter we made certain adjustments to make sure that if necessary we could get all our product out of one port instead of two that has a certain cost to it. We saw if you look at the bridge of quarter versus quarter last year there was an increase of $13 million in transportation costs. So a huge chunk of that has to do with the adjustment to move out of one port. So hoping of course that in the coming months things will work out to the better and that we lose that problem that we don't like to face.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

But in terms of our abilities, we're much more flexible now because we can actually ship all of our product from one port. It means that part of the adjustment that was made this year was that we're shipping more to the western hemisphere than we did before. So the negative is that we have less flexibility on our shipping destinations. The positive is we get better. We actually got a better return from the western hemisphere. And given that the current situation is that we see that the price for the beginning of next year when we sell product for January, we get better return than the spot price, then we prefer to defer product to any product left, which is not a whole lot to next year. So that's on geopolitics and transportation.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

In terms of Belarusian, we don't really know. There were certain things said. There are a lot of rumors in the market that if things were said there probably is reason for that, but we don't actually know. We do understand that the marginal price of shipping product from Belarusian to China by train is that it's very low, which means there isn't any profitability there. Or at least that's what we understand, so if that's the case, then I guess the Belarusians have to do something, and what exactly they do is the big question, but all in all, the trends in the production market look like prices are firming, the eastern prices are firming and all markets other than China, but inland China also looks like it's getting tightened and Brazil future sales are at a higher price than the spot sales.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

So all in all looks like potash market is firming. The only place where I don't know at this point is Europe. It's off-season and we don't see any particular demand. But in all other regions there's significant potash demand given the need for soil replenishment. So things are looking good on the side with or without Belarusian news.

Rahi Parikh
Rahi Parikh
Equity Research Assistant Vice President at Barclays

Awesome. Thank you so much.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Thank you.

Operator

Thank you. Our next question comes from Alex Jones with Bank of America. Please go ahead, your line is.

Alex Jones
Alex Jones
Director at Bank of America

Okay. Great. Thanks very much for taking my questions. Two if I can. The first one, the guidance for the year on specialties EBITDA. Could you talk about what the.

Alex Jones
Alex Jones
Director at Bank of America

Sensitivity is within that.

Alex Jones
Alex Jones
Director at Bank of America

Range? The $100 million sort of top to bottom and what would drive that to the bottom end or the top end, please. And then the second question specifically on industrial products, if I look at the pricing this quarter, it was sequentially improved, still down 6% year on year but you know, much better than the double-digit declines you've reported in recent quarters. Is that indicative of a trend? Should we expect pricing to return, you know, positive into next year from what you're currently seeing in the market or any comments you have there.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Would be which part of the business? Alex, if I may, the second Industrial Products [crosstalk]

Raviv Zoller
Raviv Zoller
CEO at ICL Group

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

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Yeah

Raviv Zoller
Raviv Zoller
CEO at ICL Group

on industrial products the price is relatively stable and there's a little bit of seasonality like for now there's a little bit like of price going up because of winter stoppage in China. But the prices have pretty much stabilized in the past few months and there's no meaningful change in price in recent months. There is a little bit less of sales of clear brine fluids in the quarter, has to do again with seasonal effects. Nothing, nothing real. And in terms of output, we're almost at full output. So I guess as long as we're at the full output, there's no reason for too much price appreciation. Price appreciation will probably appear once demand strengthens.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

On the electronic side, real estate is going to take a little more building and real estate is going to take a little longer. I didn't actually hear the whole first

Raviv Zoller
Raviv Zoller
CEO at ICL Group

question.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

I can do it. Hi Alex and thank you. Thank you for the question. Basically when we look at Q4, the way it is shaping up in many, many ways it should be a similar quarter. I'm talking EBITDA-wise. Now to Q4, Q3 and Q4 maybe to some extent this will be a bit seasonality will kick in maybe a little bit lower than we saw. Obviously a lot of the differential vis-à-vis the quarter will potentially come from the potash which we spoke about and also our release spoke about. So if I zero in on the three business divisions that comprise the specialty side of the business, then I would say that if I look at them each, all of them should be to some degree, seasonally adjusted, not as strong as Q3. The differences are not that big.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

And if I, if we do the math and we compile Q4 to what we came out in the three quarters, this one that we are reporting today in hand, then we should be firmly in the territory of our new guidance. So what can drive it to the upper side is results that will be somewhat better in the different markets, each of them with their own store rate, which could drive it a little bit down, would be obviously the other side. But we feel pretty well with the guidance that we shared with the market, which is definitely better than what we saw after Q2. That's also on the back of obviously the Q3, which we're coming out today, which is basically a good quarter.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

We normally tend to be, as you all know, quite conservative and we think extra care to fulfill our obligations to the market.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

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

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Also there's Brazil, if I may just append a quick note, which we've just reminded me is basically the Brazilian market, which obviously in the second half of the year has a lot of importance in the Southern Hemisphere, of course, and Brazil is obviously, it's so important from the agricultural point of view, but it's quite

Aviram Lahav
Aviram Lahav
CFO at ICL Group

volatile.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

So, I think, you know, adding to what Raviv said, a lot will be determined by how strong is the very end of the year. And that will know obviously only in the early days of 2025. But we seem to be well on

Raviv Zoller
Raviv Zoller
CEO at ICL Group

track.

Alex Jones
Alex Jones
Director at Bank of America

Thank you.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Welcome. Thank you.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Thank you.

Operator

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

Joel Jackson
Joel Jackson
Equity Research Analyst at BMO Capital Markets

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

Raviv Zoller
Raviv Zoller
CEO at ICL Group

Yeah. So Growing Solutions is going to be a little weaker than third quarter and Industrial Products is going to be a little weaker than third quarter. Like, like we mentioned before, because of seasonality, we don't want to break.

Joel Jackson
Joel Jackson
Equity Research Analyst at BMO Capital Markets

Right, but so sorry to

Joel Jackson
Joel Jackson
Equity Research Analyst at BMO Capital Markets

interrupt, but what I'm saying is for.

Joel Jackson
Joel Jackson
Equity Research Analyst at BMO Capital Markets

The full year over the 2024 Q3 and Q4, you've said it's 100 more. So I'm sort of asking across the second half of the year, not repeating the question the prior person asked about. Q4. Sorry.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

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

Joel Jackson
Joel Jackson
Equity Research Analyst at BMO Capital Markets

Maybe I could ask you differently versus three months ago between Growing Solutions, Phosphate and IP, which business has surprised you most to the upside?

Aviram Lahav
Aviram Lahav
CFO at ICL Group

I think that the surprises that we got, some of the surprise was in phosphate. Phosphate is enjoying a good peak period. A good period versus obviously the last year on a good period versus what we internally budgeted. And I think we all understand the macro side that is contributing to that and that is both the commodities and the specialty side. Without going into the breakdown there, I'm not sure it surprised us but what we are getting more and more confident with and happy with is what's going on on the agricultural side in the company. The strategy basically has always been there to differentiate and to grow the specialty fertilizer side, to grow the biostimulants etc. side and it is working and we see that we are getting a healthy margin and that is.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

I'm not sure it's a surprise Joel, but we're very happy with it. On the Industrial Products basically we also had a good quarter and this is as we know now it's a fight inside the market that the demand is not healthy yet. So we are supplying obviously at high capacity but the selling prices is nowhere near. But notwithstanding that we were able to deliver a solid quarter. Not sure it surprised us but we were happy with it that. So there you have basically the three. If I sum up the three divisions that they did.

Joel Jackson
Joel Jackson
Equity Research Analyst at BMO Capital Markets

Yeah.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Better. And I think it's a highlight of the quarter itself.

Joel Jackson
Joel Jackson
Equity Research Analyst at BMO Capital Markets

That helpful. And my final question is, you know, in your release and presentation, use language like you intend to limit total potash sales this year to 4.6 million tons in expectation of improved conditions. Now if I look at your last four quarters of production, you've done about 4.5 million tons. The run rate is lower the first three quarters, 2024. So it looks like, you know, you don't have the production to do more than 4.6. You said in expectation of improved conditions. What does that mean? Are you talking about. Oh, you're holding back volume to get better price next year though. We just talked about what the production has been.

Joel Jackson
Joel Jackson
Equity Research Analyst at BMO Capital Markets

Is this improved conditions and

Joel Jackson
Joel Jackson
Equity Research Analyst at BMO Capital Markets

logistics? I'm just trying to understand what the exact message is putting out there today. Production, sales discipline, anything you want to talk.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

So the message is simple. Currently we're capable of producing about 4.65 this year and we're capable of selling about 4.75. But at this point it doesn't make sense to sell any more than we've already committed. So the reason is twofold. One is because prices are firming for next year, so we actually have already sold for January and February. And second is that due to the current logistic challenges, we feel that if we can defer sales, certain sales, we can get better transportation costs, hopefully if the security situation improves. If it doesn't improve, then it's only the pricing. But if it doesn't improve, it's also the logistics, which are very significant.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

Just so you understand, in order to transport to the east, in some cases costs double if we send the product out of the port that is farther from the plant. So it makes sense from both of those perspectives. And at a certain point we decided to stop. Actually, part of the fact that we're stopping means that we're actually capable of less production. We would have been capable of more production, but we added additional preventive maintenance because in the past year or so, because of a lot of people being on reserve duty, we had to take some calculated risks and do less preventive maintenance. You can't keep on going that way for a long time without paying a dear price.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

We took some preventive steps this year, this quarter. It's actually not this quarter, it's September and October. And due to that our maximum production for this year could be a little over 4.6. It was more than that a little while ago, but we're comfortable with what we did because we sort of cleaned up everything that needed to be done in order to minimize the risk going

Raviv Zoller
Raviv Zoller
CEO at ICL Group

forward. Hope that answers.

Joel Jackson
Joel Jackson
Equity Research Analyst at BMO Capital Markets

Thank you.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

Thank you Joe.

Operator

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

Kevin Estok
Kevin Estok
Vice President, Equity Research, Chemicals, Emerging Technologies, and Industrial Biotech at Jefferies

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

Raviv Zoller
Raviv Zoller
CEO at ICL Group

Could you repeat the question because it was difficult for us to.

Kevin Estok
Kevin Estok
Vice President, Equity Research, Chemicals, Emerging Technologies, and Industrial Biotech at Jefferies

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

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Okay, I'll take that, I'll try to answer you and I'm taking it a little bit broader maybe than you meant, so you will keep me in line, so basically, as you know, starting from the mere setup of the growing solutions, it's our flag to do, to be innovative and to differentiate ourselves. That's a given. Second is we are investing in areas that we believe that will be significant or very significant in the future of agriculture. And that obviously is the area of the biologicals, some in delivery systems, in better uptake inside the plant, etc. However, and as a big however, what we do is applied R&D, we are taking steps, gradual steps to build up the portfolio.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

What we are not doing is to do leapfrogs and go into areas which today are really exploratory, and we will come into. I guess we will come into these areas, but we are stretching the limits of GS, but we are not going into things which are today quite remote from the core of our essence. That's why if you, if I understand you correctly, you're talking about white spaces, really really going to the forefront of inter alia, gene editing and things like that which I know from my past that the companies have gone into. But it's, I would say, in the agrochemical space. It's as a way to go there. I mean it's not as advanced obviously as the pharma world.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

The long answer to a short question was, we are careful to build block after block in our innovation and not jump too far ahead that we don't have the pull together yet. Is that understood?

Kevin Estok
Kevin Estok
Vice President, Equity Research, Chemicals, Emerging Technologies, and Industrial Biotech at Jefferies

Thank you.

Kevin Estok
Kevin Estok
Vice President, Equity Research, Chemicals, Emerging Technologies, and Industrial Biotech at Jefferies

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

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Yeah.

Kevin Estok
Kevin Estok
Vice President, Equity Research, Chemicals, Emerging Technologies, and Industrial Biotech at Jefferies

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

Kevin Estok
Kevin Estok
Vice President, Equity Research, Chemicals, Emerging Technologies, and Industrial Biotech at Jefferies

Any?

Raviv Zoller
Raviv Zoller
CEO at ICL Group

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

Aviram Lahav
Aviram Lahav
CFO at ICL Group

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

Aviram Lahav
Aviram Lahav
CFO at ICL Group

China.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

Correct, yeah. Some of those tons are not non-Chinese.

Aviram Lahav
Aviram Lahav
CFO at ICL Group

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

Kevin Estok
Kevin Estok
Vice President, Equity Research, Chemicals, Emerging Technologies, and Industrial Biotech at Jefferies

Thank you very much.

Raviv Zoller
Raviv Zoller
CEO at ICL Group

Thank you.

Operator

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

Raviv Zoller
Raviv Zoller
CEO at ICL Group

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

Aviram Lahav
Aviram Lahav
CFO at ICL Group

Thank you.

Operator

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

Executives
    • Peggy Reilly Tharp
      Peggy Reilly Tharp
      VP of Global Investor Relations
    • Raviv Zoller
      Raviv Zoller
      CEO
    • Aviram Lahav
      Aviram Lahav
      CFO
Analysts
    • Rahi Parikh
      Equity Research Assistant Vice President at Barclays
    • Alex Jones
      Director at Bank of America
    • Joel Jackson
      Equity Research Analyst at BMO Capital Markets
    • Kevin Estok
      Vice President, Equity Research, Chemicals, Emerging Technologies, and Industrial Biotech at Jefferies
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