ICL Reports Record Second Quarter 2022 Results and Raises Guidance

29 July 2022, Israel: ICL, a leading global specialty minerals company, today reported its financial results for the second quarter ended June 30, 2022. Consolidated sales of $2,880 million were up 78% year-over-year versus $1,617 million. Operating income of $1,139 million was up 369% versus $243 million and up 383% versus adjusted operating income of $236 million. Net income of $563 million was up 302%, while adjusted net income of $751 million was up 456%. Adjusted EBITDA of $1,258 million was up 249% versus $360 million. EBITDA margin of 43.7% was up versus 22.3%.

ICL’s continued focus on long-term specialties solutions benefitted the company once again, with additional significant upside from commodity prices. During the quarter, the company’s strong performance was supported by increased demand and higher prices in most markets and achieved despite increased raw material costs and continued global supply chain challenges.

“In the second quarter, ICL delivered all-time record sales, operating income and EBITDA, and another consecutive quarter of profit and margin growth, with record results from all our specialty businesses and our commodity businesses. We also achieved multiple production records, as we continued to focus on efficiency and productivity,” said Raviv Zoller, president and CEO of ICL. “Our performance in the quarter reaffirms our specialties strategy, and our strong balance sheet will allow us to accelerate business expansion opportunities, including growth through investments in R&D, capacity and new products, among others.”

Due to very strong results in the first half, ICL is raising its expectations for full year adjusted EBITDA to a range of $3,800 million to $4,000 million, from previous guidance of $3,500 million to $3,750 million. Between $1,500 million to $1,600 million of 2022 EBITDA is expected to come from the company’s specialties focused businesses, up from previous expectations calling for contribution of $1,300 million to $1,400 million. (1a)

In addition, ICL has reached an understanding with the Israeli Tax Authority and settled the dispute concerning the Israeli Law for Taxation of Profits from Natural Resources. The settlement agreement provides final assessments for the tax years 2016 to 2020, as well as outlines understandings for the calculation of the levy for the years from 2021 and onwards. As a result of the settlement agreement, in the second quarter of 2022, the company recognized tax expenses for prior years in the amount of $188 million. ICL welcomes the conclusion of this dispute, which ended through a dialogue and prevented the potential for years-long legal proceedings, while providing expected business certainty for years to come.

Key Financials

Second Quarter 2022

US$MEx. per share data	2Q’22	2Q’21	YoYChange
Sales	$2,880	$1,617	78%
Gross profit	$1,539	$570	170%
Gross margin	53.4%	35.3%	1,819 bps
Operating income	$1,139	$243	369%
Operating margin	39.5%	15.0%	2,452 bps
Net income attributable to shareholders	$563	$140	302%
Adjusted net income attributable to shareholders(1)	$751	$135	456%
Adjusted EBITDA(2)	$1,258	$360	249%
Adjusted EBITDA margin(2)	43.7%	22.3%	2,142 bps
Diluted earnings per share	44¢	11¢	300%
Cash flows from operating activities	$627	$242	159%

(1) Adjusted net income attributed to shareholders is a non-GAAP financial measure. Please refer to the adjustments table and the disclaimer below. (2) Adjusted EBITDA is a non-GAAP financial measure. Commencing 2022, the company’s adjusted EBITDA definition was updated, see consolidated EBITDA table and the disclaimer below.

Industrial Products

Second quarter 2022

• Sales of $486 million were up $76 million or 19%.
• Record segment operating income of $191 million was up $77 million or 68%.
• Record EBITDA of $206 million was up $78 million or 61%.
• Pricing remained elevated year-over-year, even as some end-markets continued to moderate.

Highlights

• Elemental bromine: Sales decreased year-over-year on lower volumes, while overall bromine prices remained higher versus the prior year.
• Bromine-based flame retardants: Sales increased on higher year-over-year prices, however, end-market demand showed signs of moderation.
• Phosphorus-based flame retardants: Sales were lower year-over-year, as some Chinese supply re-entered the market, however, product pricing was preserved.
• Clear brine fluids: Sales increased year-over-year, as the oil and gas industry maintained its positive momentum.
• Specialty minerals: Continued strong demand from the dietary supplements and pharmaceutical end-markets, and also higher sales of magnesium chloride and potassium chloride for use in industrial applications.

Potash

Second quarter 2022

• Sales of $951 million were up $571 million or 150%.
• Record segment operating income of $576 million was up $534 million – a significant increase.
• EBITDA of $616 million was up $536 million or 670%.
• Grain Price Index increased year-over-year, with corn up 15.7%, rice up 22.4%, soybeans up 22.5% and wheat up 62.5%.
• Average potash realized price per ton of $750 was up 167% year-over-year, as prices increased, with continued disruptions in global fertilizer availability.

Highlights

• ICL Dead Sea
  – Production increased year-over-year, as the site achieved both second quarter and first half production records and continued to benefit from operational improvements and efficiencies.
• ICL Iberia
  – Production improvements continued to advance at the Cabanasses mine, with additional progress expected in the second half of the year.
• Metal Magnesium
  – Sales increased on higher prices, as a competitor faced continued production constraints.

Phosphate Solutions

Second quarter 2022

• Record sales of $915 million were up $333 million or 57%.
  – Phosphate specialties: Record sales of $493 million, up $164 million or 50%.
  – Phosphate commodities: Record sales of $422 million, up $169 million or 67%.
• Record segment operating income of $268 million was up $191 million or 248%.
• Record EBITDA of $315 million was up $182 million or 137%.
  – Phosphate specialties: Record EBITDA of $131 million, up $81 million or 162%.
  – Phosphate commodities: Record EBITDA of $184 million, up $101 million or 122%.
• The YPH joint venture realized higher prices for both specialty products and commodity fertilizers, combined with increased production efficiency.
• Commodity market prices continued to trend higher, as did raw material prices and production costs.

Highlights

• Phosphate salts: Sales increased, with higher prices and strong demand across all regions.
• White phosphoric acid: Sales benefitted from continued higher demand and prices across all major regions, which helped offset increases in raw material costs.
• Dairy protein: Sales increased significantly year-over-year, with strong demand for specialty milk powders.
• Phosphate fertilizers: Sales continued to increase, amidst reduced supply, while the market for sulfur and other raw materials remained tight.
• Specialty mono ammonium phosphate (MAP): Demand continued to grow for use in cathode active materials (CAM), such as lithium iron phosphate (LFP) destined for electric vehicles and other energy storage offerings.

Innovative Ag Solutions

Second quarter 2022

• Record sales of $700 million were up $366 million or 110%.
• Record segment operating income of $141 million was up $120 million or 571%.
• Record EBITDA of $155 million was up $121 million or 356%.
• Positive fertilizer price momentum continued, as well as higher raw material prices and reduced availability, combined with ongoing supply chain issues.

Highlights

• Specialty fertilizers: Record sales driven by higher prices across all regions, which helped offset raw material cost inflation.
• Turf and ornamental: Turf and landscape remained strong, based on golf and other sports. Following a good start, ornamental horticulture began to moderate at the end of the quarter, due to a shift in consumer spending.
• Brazil: Synergies and robust results were ahead of expectations and driven by higher prices, in advance of the primary planting season.
• Polysulphate: Signed long-term supply agreement with India Potash Limited (IPL) through 2026 for an aggregate amount of 1 million metric tons.

Financial Items

Financing Expenses

Net financing expenses for the second quarter of 2022 were $14 million, down versus $30 million in the corresponding quarter of last year.

Tax Expenses

Tax expenses in the second quarter of 2022 were $540 million, reflecting, in part, a settlement agreement with the Israeli Tax Authority regarding the Surplus Profit Levy. As a result, the company recorded tax expenses in respect to prior years in the amount of $188 million. Excluding this amount results in tax expense of $352 million, reflecting an effective tax rate of 31%, compared to $64 million in the corresponding quarter of last year, reflecting an effective tax rate of 30%.

Liquidity and Capital Resources

ICL has long-term credit facilities of $1,200 million, of which $291 million were utilized as of June 30, 2022. As of July 2022, the total long-term credit facility stands at $1,100 million, following an early termination by one the banks.

Outstanding Net Debt

As of June 30, 2022, ICL’s net financial liabilities amounted to $2,241 million, a decrease of $208 million compared to December 31, 2021.

Dividend Distribution

In connection with ICL’s second quarter 2022 results, the Board of Directors declared a dividend of 29.18 cents per share, or approximately $375 million, up versus 5.26 cents per share, or approximately $68 million, in the second quarter of last year. The dividend will be payable on September 14, 2022, to shareholders of record as of August 31, 2022.

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