ICL Group Ltd. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Performance: Sales totaled $6.841 billion, adjusted EBITDA was $1.469 billion (21% margin), adjusted diluted earnings per share was $0.38. Specialty-driven EBITDA increased 8%. Free cash flow was $758 million, and a total dividend of $242 million was distributed.
• Divisions: Industrial Products strengthened partnerships and customer relationships. Phosphate Solutions benefited from favorable volume, mix, and lower raw material costs. Growing Solutions focused on efficiency efforts, M&A, and new product innovation.
• 2025 Outlook: Expect specialties-driven EBITDA to be between $0.95 billion to $1.15 billion, total sales volumes between 4.5 million and 4.7 million metric tons, and an effective annual tax rate of approximately 30% in anticipation of higher potash prices.

Segment Performance

• Industrial Products: 2024 sales were $1.239 billion, with EBITDA of $281 billion. In the fourth quarter, sales were down year-over-year, but EBITDA was $70 million, up 25% with an EBITDA margin moving from 19% to 25%.
• Potash Division: 2024 sales were $1.656 billion, with EBITDA of $492 million. Average potash price decreased nearly $100 CIF per ton, and total sales volume was down approximately 127,000 metric tons.
• Phosphate Solutions: 2024 sales were $2.250 billion. Results were ahead of expectations despite lower acid prices, with annual EBITDA of $559 million, slightly down year-over-year but EBITDA margin expanded to 25%.
• Growing Solutions: 2024 sales were $1.950 billion, down year-over-year, but EBITDA was $202 million, up 70% with an EBITDA margin of 10%, expanding significantly versus the prior year. Specialties businesses represented 70% of 2024 EBITDA and 73% of fourth quarter EBITDA.

Guidance

• Specialties-driven EBITDA for 2025 is expected to be between $0.95 billion to $1.15 billion.
• Total sales volumes for 2025 are projected to be between 4.5 million and 4.7 million metric tons.
• The effective annual tax rate for 2025 is anticipated to be approximately 30% due to higher potash prices.

Risks

• War-related disruptions in Israel impacting maintenance and production.
• Operational and logistical challenges at Dead Sea operations.
• Geopolitical issues such as Red Sea transport challenges.
• Tariff and trade dispute impacts on certain products, e.g., industrial products' flame retardants facing antidumping measures.

Question and Answer

Q: First of all, Raviv, all the best for your upcoming retirement in a few weeks. It was a pleasure working with you all the best and Elad, welcome on your new expanded role from growing solution into CEO. So I wanted to get that off first. Great, great stuff. So 2 questions I had for you. So number one was really just a more general maybe if you could talk a little bit about the demand drivers that you've been seeing and you just been laying out with the Phosphate Solutions business. I mean it feels like it was a very strong 2024. It was like one of the, call it, more commoditized still exposed ones but holding in fairly well over a year-over-year basis. So just wanted to understand like the underlying demand, be it what goes into food, what goes into fertilizer, what goes into battery materials. If you could share some incremental thoughts as to how you think about 2025 in Phosphate Solutions in particular.

A: All right. Thanks. So we had headwinds coming from WPA prices, which were trending down. But at the same time, we overcame that by increasing volumes. And the increase of volumes of specialty products has come primarily from expansion with additional innovation, innovative products to the food products in China where we set up a new production facility for specialties, new products in pharmaceuticals and for cement applications. We had a good pipeline of products, so we still have a great pipeline going forward into 2025. We expect now that prices forecasting has stabilized, and we expect continued volume growth in 2025. The overall market hasn't grown very much probably by 2% or 3%, but we've grown our market share through volume.

Q: I guess real quick, I mean, have you guys seen any Chinese bromine capacity exiting the market?

A: We haven't seen the bankruptcies in the past 3 or 4 quarters. We saw 1 bankruptcy before that, but we have seen significant reductions of use of capacity both in China and also in [indiscernible]. And of course, we've replaced that -- we replaced a lot of that capacity that's coming out of the market. So again, reductions in production, not any significant bankruptcies yet.

Q: It's been such a pleasure to work with you all these years. Good luck in your next chapter. A couple of questions for me. You obviously reiterated your specialty guidance or EBITDA guidance for the year, and we're talking about, of course, higher potash prices lately. Can you talk about -- in potash, like I imagine your outlook is better than it was 3 or 4 months ago when you gave your initial specialty guidance. But -- which is reiterate, like I said, I imagine you have a better potash outlook now than you did a few months, so is that fair?

A: We have a better outlook on pricing. If that was the question, on pricing and -- yes, look, what we have now is that prices are trending up, and they've actually gone up about 15% in the U.S. in the past month and a bit. And it looks like Chinese and Indian contracts that is going to happen very soon. And of course, they're going to -- at least it looks like they're going to show a nice increase in price. To give you exact numbers, it would be too early for that at this point.

Q: I wanted to touch on the battery market from a different angle, which is -- to what degree do you think -- do you see you need to pull forward investments in the LFP downstream in order to hit your market share goals? I mean what -- in other words, to what extent are you seeing competitors ramp up capacity in response to the market opportunity?

A: It's a great question. We see things are happening very slowly in the U.S. We don't see too many competitors moving forward, although everybody knows where the market is going because it requires significant CapEx. It requires committed customers. So we've pulled up our plans. I guess, so far by 14 or 15 months, and it could be more because we're not going to supply capital material before the cell factories are ready to produce. So that is the timing that is necessary. So some of that in the U.S. has to do with the adaptation of the adaptation to non-Chinese technology, which is not trivial. There are not a lot of competitors out there that are able to do that at this point. I think in Europe, they actually started slower, but things may move faster because Europe is keen on allowing the Chinese to be involved, and they're not excluding Chinese technologies. So for us, for example, the safest place to partner with a #2 player in the world, Dynanonics, and go after the European market. So we may end up going after the European market faster than we originally expected and the U.S. market moves slower than we expected at the beginning. And it all has to do with making certain that we acted in a disciplined way with our CapEx and with our strategy.