ICL Group Ltd (ICL) Earnings

Management highlights

- Strategic Direction * Confirmed three core strategic principles first announced in Q3 2025: 1) drive profitable growth in specialty crop nutrition and specialty food solutions; 2) maximize performance of core upstream businesses including phosphate, potash, and bromine; 3) pursue portfolio optimization and enterprise-wide cost efficiency. * Announced a new market-aligned organizational structure taking effect Q1 2027, with four new segments: Nutrition Solutions (consolidated food, beverage, health, and pharma offerings), Industrial Products (performance and safety solutions for electronics, energy, and construction end markets), Growing Solutions (unchanged, focused on specialty plant nutrition), and Essential Minerals (combined upstream potash and phosphate fertilizer production). The new structure is designed to increase investor visibility and strengthen focus on high-growth end markets. * Targets $1.5 billion in specialty food solutions revenue by 2029, expanding from its current leading position in the $1.5 billion phosphate food specialty market into the larger $35 billion functional food ingredients market, which has a 6% expected 5-year CAGR. * Specialty crop nutrition, a core growth engine, grew from $1 billion sales / $60 million EBITDA in 2020 to $2 billion sales / over $200 million EBITDA in 2025, with remaining significant growth runway. - Operational and Financial Highlights * Total Q2 2026 results: adjusted EBITDA of $448 million (up 28% YoY), adjusted net income of $149 million (up 35% YoY), adjusted EPS of $0.12 (up 33% YoY), operating cash flow of $290 million (up 8% YoY), and free cash flow of $94 million (up 34% YoY). These results were achieved despite absorbing $100 million in higher raw material costs and over $40 million in negative exchange rate impacts. * Launched Elevate, an enterprise-wide cost transformation program, targeted to deliver over $150 million in annual EBITDA improvement by end-2027, growing to over $350 million annually by end-2028. 50-60% of savings are expected from operational productivity improvements, 30-40% from reduced external spend, and 10-20% from SG&A optimization. AI will be leveraged to improve efficiency, innovation, and decision-making. * The company maintains a strong balance sheet with $2.2 billion in available cash, completed an $800 million senior notes offering, and maintains a 50% adjusted net income dividend payout ratio, with a 4.1% trailing 12-month dividend yield.

Guidance

- Management maintains the full-year 2026 guidance range for consolidated adjusted EBITDA of $1.5 billion to $1.7 billion, with no upward or downward revision to the range. - The full-year 2026 potash sales volume guidance is maintained at 4.5 million to 4.7 million metric tons, supported by 2025 operational improvements. - Full-year 2026 adjusted tax rate guidance remains approximately 30%. - Management notes that Q2 mitigation actions offset some higher raw material costs, but sustained elevated spot sulfur prices will create margin pressure for phosphate products in the second half as higher-priced inventory is consumed.

Segment performance

For the second quarter of 2026, ICL Group delivered total company sales of $2.1 billion, up 17% year-over-year, with the following segment performance: 1. Industrial Products: Q2 2026 sales of $414 million, up 30% year-over-year, contributing 19.7% of total company revenue. Q2 2026 EBITDA was $130 million, up 88% year-over-year. Performance was driven by higher bromine prices and increased volumes, with strong demand for bromine-based flame retardants from electronics end markets, stable phosphorus-based flame retardant sales, solid clear brine fluids demand, and growing sales of specialty minerals and food/pharma products. 2. Potash: Q2 2026 sales of $468 million, up 22% year-over-year, contributing 22.3% of total company revenue. Q2 2026 EBITDA was $154 million, up 34% year-over-year. Average potash price was $376 CIF per ton (up 13% YoY, 4% sequentially), and production volumes hit 1,058,000 metric tons (up 11% YoY). 3. Phosphate Solutions: Q2 2026 sales of $722 million, up 13% year-over-year, contributing 34.4% of total company revenue. Q2 2026 EBITDA was $136 million, a slight year-over-year increase. Higher commodity and specialty phosphate prices partially offset elevated raw material costs; specialty food phosphate saw both price and volume growth across dairy, meat, and seafood end markets in China and India. 4. Growing Solutions: Q2 2026 sales of $605 million, up 12% year-over-year, contributing 28.8% of total company revenue. Q2 2026 EBITDA decreased year-over-year. Weak demand persisted in Brazil, but performance improved sequentially from April through June; sales and profitability improved in Europe due to product mix optimization efforts.

Risks & headwinds

- Geopolitical instability in the Middle East has driven large increases in raw material (especially sulfur) and ocean freight costs: Q2 2026 spot sulfur prices increased 72% sequentially and over 210% year-over-year, while average ocean freight rates increased 45% sequentially in Q2 and continued rising into July. Sustained high sulfur prices create material margin pressure for phosphate products in H2 2026. - Persistent weak demand and affordability/financing challenges in Brazil (where interest rates remain above 9%) create downside risk for Growing Solutions results in H2 2026, particularly in Q3. - Bromine prices are volatile and highly sensitive to ongoing geopolitical turbulence in the Middle East, creating uncertainty for Industrial Products segment performance in H2 2026. - Currency exposure to the Israeli shekel: shekel strength against the U.S. dollar increases operating costs for ICL's Israel operations, creating additional margin pressure. - Global farmer affordability remains constrained: U.S. farmer sentiment declined in Q2 2026 due to high input costs, and inflation-adjusted U.S. net farm income is forecast to decline 2.6% in 2026.

Analyst Q&A

• Q: Analyst asks what share of Industrial Products' strong Q2 EBITDA growth came from price versus demand, and how the segment should perform in H2 2026 after the outstanding Q2. /

  A: Bromine prices peaked above $6,000 per ton in April 2026, moderated slightly in May-June, and returned to ~$4,500 per ton in July. Q2 performance was driven by locking in these strong elevated bromine prices across transactions. $4,500 per ton is still an attractive price level, and flame retardant product lines continue to perform solidly. Management notes the current price level is higher than Q1 2026, but future performance will depend on ongoing market conditions.\n\nQ: Analyst asks what gives management confidence in hitting the Elevate program targets of $150 million annual EBITDA improvement by 2027 and $350 million by 2028, especially the operational productivity component that makes up half the target. / A: Management explicitly states guidance is conservative, and internal targets are actually higher than the stated $350 million. ICL has expanded significantly in recent years, with over 40 production sites and a complex, widespread supply chain that has not been the focus of targeted efficiency efforts to date. There is substantial untapped potential for productivity and allocation improvements across the organization, so management is confident the targets will be met or exceeded.\n\nQ: Analyst asks how ICL is managing the ongoing sulfur supply and price crisis, and what to expect for phosphate margins in H2 2026. / A: Sulfur is the primary headwind for H2 2026, with two core challenges: limited supply availability and extreme price increases, with current spot prices around $1,200 per ton CFR. ICL has secured enough sulfur to maintain full production through Q3 and early Q4, and has no plans to reduce production at its Rotem and YPH facilities, as demand for phosphate products remains strong. However, production costs will be significantly higher than in H1 2026, leading to compressed phosphate margins in H2. ICL's diversified product and geographic portfolio provides flexibility to optimize sulfur allocation across customers and markets via detailed sales and operations planning.\n\nQ: Analyst asks why management maintains the wide $200 million 2026 EBITDA guidance range when current LTM EBITDA is near the top end of the range, and what downside risks could push results to the lower end. / A: The full impact of extremely high sulfur prices has not yet shown up in results, and this is a material ongoing headwind. Additional downside risks include shekel-dollar currency exposure (ICL has over $1 billion equivalent in shekel-denominated costs) and soft demand in Brazil, which is a large contributor to Q3 results. Bromine prices are currently better than expected but are highly dependent on volatile Middle East geopolitics, while potash markets remain stable. Management expects H2 results to be solid, but most likely lower than H1 2026.