Q1 2021 Icl Group Ltd Earnings Call
Okay, and ICL Dash group Dotcom.
Earlier today, we filed a report with the security's authorities and the stock exchanges and the U S and Israel.
Those reports as well as the press release are available on our website.
There will be a replay of the webcast available a few hours after the meeting and the transfer of who will be available shortly thereafter.
Presentation, which will be reviewed today. There's also filed with the securities authorities and is available on our website. Please be sure to bridge view of the disclaimer on slide too.
Our comments today and will contain forward looking statements within the meaning of of the private securities litigation of format of 1995 and the.
The statements are based on management's current expectations and and not guarantee of the future performance the company and it takes no obligation to update any information discussed on this call at any time.
And we will begin with the presentation by our C. E O. Mr Review zoeller administer called the Ottoman or CFO. After the presentation. We will open the lines of the Q&A session relief. Please.
Thank you Peggy and welcome everyone.
I'm pleased to report solid first quarter earnings, which were driven by record the results of across all of our specialty businesses as we executed on the state of the growth strategy.
We continued to create strong cash generation and margin expansion supported by improved market for the Mentals, which began and the latter part of 2020 considered into the first quarter and now the second quarter, specifically on slide three you can see some highlights from each of division.
Industrial products record quarter was driven by strong demand and high market prices and bolstered by longterm contracts.
Or put ash operations delivered another record for first quarter production of the dead Sea and our team and Spain completed the launch of the ramp connecting our cabin assets mine and sorry of plant.
[noise] phosphate solutions delivered record sales and EBITDA, including or White P. H joint venture driven by product innovation cost efficiencies and the continued shift of specialties.
[noise] innovative acts solutions also had a remarkable quarter as of results benefited from the unified sales and marketing organization higher volume and and prove product mix.
Each of these divisions is focused on one or more of our strategic target markets and slight for shows the progress we're making in these efforts as we work together to create impact for a sustainable future for our communities our employees and our investors.
And our industrial and markets are recent investments and capacity have enabled us to meet booming longterm demand for our specialty offerings.
For our food focus while of smaller part of our business today, our commitment should be apparent falling the strategic editions, we've made to our leadership team and our board of directors.
I would like to welcome both Chris Millington to our executive team is our new head of food specialties and got the lesson to our board of directors.
As the end market for bromine and phosphorus based flame retardants exhibited strong demand, including electronics, construction and textiles, and with the automotive market beginning to pick up.
While sales of clear brine fluids are lagging along with the recovery in oil and gas, we did have a record quarter and specialty minerals.
This was driven by increased sales to the pharma and body care markets as well as higher prices and sales of magnesium chloride due to more traditional winter weather and the United States.
[noise] elemental bromine prices have continued to increase since the end of 2020.
However, we've also seen some increases in freight rates and raw material prices and experienced some raw material constraints.
We're at full capacity at our new TBA plant and notable love and are already considering expanding capacity for additional long term agreements.
As always we remain focused on our value over volume and this specialty business.
Best quarter ever with higher prices increased volume and improve mix as Welles procurement and production efficiencies.
Overall commodity price improvement, which began and the second half of 2020 continued and the first quarter, along with increased prices for raw materials and higher freight rates.
Four specialties, we have strong results were phosphate food specialties with higher volumes lower operating costs and favorable exchange rates.
Food demand remains stable as it did through 2020, and we benefited from our strong global presence and of reputation of our customers could rely on combined with our regional production network.
[noise] for our industrial solutions, we began to see and market demand return while phosphate fertilizers saw continued significant recovery across all geographies.
Finally, turning to slight then and are innovative and solutions of business, which had a remarkable quarter with sales of $241 million up more than 20%, while EBITDA of nearly $30 million was up more than 50%.
We saw strong demand and most of our target markets with higher volumes and improved product mix. We also maximized lower price raw materials and stock, but we expect these costs and puts to increase and the second quarter.
Most importantly, innovative acts solutions benefited from the unified sales and marketing organization that we put in place last year and from geographical expansion and new product launches the.
The Division also had record turf and ornamental sales up more than 25% with higher volume following rather soft first quarter of last year.
[noise] specialty agriculture also had a good quarter with sales of the double digits.
[noise] overall innovative act solutions benefited from leading market share and sales of higher margin products and we expect greater contribution from this business falling our recent acquisition announcements and Brazil and there are more details on slide 11.
[noise] and mid March we announced the acquisition of South American plant nutrition business of Comcast minerals for approximately $400 million.
When combined with our existing operations and Brazil, and a recent for lack of acquisition ICL will become Brazil's leading specialty plant nutrition company and this will allow us to deliver the critical mass we have been seeking and Brazil.
[noise] the compress operations cover of broad range of solutions and include all key crops and Brazil with the presence and twenty-five out of twenty-six Brazilian states.
Cost of quarter for ICL and it would not have been possible without the truly talented team we have spread out across the globe.
I would like to thank each and every one of them for their hard work and dedication this quarter and every day.
With that I'll turn the call over to Columbia.
Thank you of Aviva and to all of you for joining US today is the report significant improvement in the overview of results, which we've just reviewed.
On Slide 14, you can see that in addition to the performance. We also maintain our financial strength with liquidity of more than one point to $1 billion.
We maintain a high level of liquidity, even after the funding of the first the lack of acquisition early in January of this year and.
And more than 200 million daus of principal debt repayments during the quarter.
In the first quarter, we deliver of the improvements in both operating cash flow and free cash flow supported by strong execution and market fundamentals.
The 2.4 net debt to EBITDA ratio was down slightly from the fourth quarter of last year.
And we have no major short or mid term principal debt repayments on the horizon.
On Slide 15, you can see some of the commodity price improvement of the referenced.
Recovery that began in the fourth quarter has continued into the first quarter and we believe of additional upside may be ahead.
For the first quarter of our average potash realized price per ton of 257 dollar was only 3% higher year over year indicate and the recent price increases will be more evident in the second quarter and even more so in the third quarter.
For force prices are also participating in the commodity price upcycle.
And elemental bromine prices in China recently reached another record high mainly due to stronger demand and continued the government and regulatory restrictions.
But if you turn to slide 16, you can also see the increases we're facing on the cost side. For example, the recovery trend in the phosphate market was followed by major raw material price increases including sulfur.
While this clearly affected phosphate commodities higher freight rates impacted all of our divisions.
With the entire marketplace feeling the impact of higher freight it's an opportune time to remind you of our logistical advantage the.
Total <unk> proximity to key shipping routes.
As in the past will return and our ability to get to market faster and at the lower cost.
On slide 17, with broken out our sales and profit to give you a better idea of where and how we benefited in the first quarter. This will also help you for you of some of the parts of our tuition models.
Price and volumes both of the positive effect on our sales and EBITDA. However.
However, as I just discussed the raw materials and transportation.
The combined negative impact of nearly $30 million.
For the slide I would also like to call out the continued shift of phosphate solutions to more specialty products, which now make up 54% of total sales and 51% of EBITDA.
Turning to slide 18, you can see the contribution to sales and EBITDA by business.
No matter, how you look at it the first quarter was an exception and one for ICL with all the vision driving improvement there.
The result, we are raising our guidance expectations and you can find the details on slide 19.
For the full year, we now expect and adjusted EBITDA range of between 1.090 billion of and the $1.175 billion.
Clearly the improved market conditions, we saw and the first quarter combined with prompt execution by our teams made the high end of our previous guidance very achievable and this is reflected in our renewal range.
And with that I would like to thank you for joining and turn the call over to the operator for the Q&A.
Thank you, ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced by the operator, if you wish to cancel your request. Please press the hash key once again Thats star one if you wish to ask the question.
Please standby, while we compile the names and this will take a few moments.
Your first question comes from the line of Alexander Jones of Bank of America. Please ask your question.
Great. Thanks, and good afternoon of.
Even and Kobe.
The first question if I may on the guidance, obviously, you did nearly $300 million of EBITDA.
This quarter and you've highlighted the potash and phosphate prices continue to increase.
Is there any reason why we shouldn't.
Annualized this quarter, and perhaps with a bit of and increase and get to number of above your guidance range or in other words of you being more cautious because any particular factors I'll just.
Waiting to see how things play out.
Yeah.
And as thanks for the question as you recall, we were giving guidance for the first year and the history of the company and.
And the we want to be very cautious about how we deliver guidance.
And it's.
It's built bottom up and.
And we had no intention of the changing.
Changing guidance before mid year.
But the unfortunate well not unfortunately, but when we gave guidance. Originally we mentioned that we were basing it on the existing prices and the prices have moved considerably and.
And the Ah.
Recent the April signing of the contract and India.
The implies that the for the rest of the year, we have and upside of about the $80 million not taking into account the some of the price moves in recent days.
And we factored in about additional $30 million of the logistic costs, so roughly about a $15 million and then we.
<unk> exceeded our plans for Q1 by about $20 million. So those two factors the net upside and put as prices and the overachieve and mint and the Q1.
<unk> brought us to this update.
Another thing that I want to clarify is that we're talking about.
Our guidance that the that is basically three point 85 times EBITDA of the first quarter, which is roughly a a linear a stipulation.
Whereas the fourth quarter is usually weaker for seasonal and other reasons. So that's pretty much how we got two of the updated guidance the bottom up I also want to clarify that the this doesn't.
And then include any upside from the Brazilian acquisition given that we don't have any final clarity on when the closing will happen.
Right now, we're pretty optimistic that the.
The results of the zone acquisition will be consolidated from most of the second half of the year. So if that happens and there'll be room for additional update of guidance as well. So again, it's a it's the bottom up.
Based on the linear extrapolation and taking into account.
Some of the date of the pricing of potash net of our additional transportation logistic costs.
And not taking into account the possible effect of the consolidation of our recent Brazilian acquisition and I hope that clarifies and again keep in mind, yes, maybe we're a little conservative with the first year, we feel that we must be very very responsible towards our shareholders and.
And we don't want to over promise, one and manage this carefully.
And we appreciate your patience.
Thanks from me that that's part of Clay, maybe one more question if I may specifically on the industrial products on my calculation. Your volumes are up about 10% versus 2019, and this quarter. How would you expect that to evolve going forward into the next couple of quarters do you think there's any.
And the sustainable element, the where customers are restocking on the opposite side a couple of your competitors one of them and they've been talking about issues related to flooding.
Backlog in the first quarter impacting volumes in the second of thoughts or is there any.
But the market share gains thanks.
Okay. So fundamentally we've gained market.
Market share and we'll continue to gain market share, but actually not from our competitors, but the based on the strategic shift we made two long term contracts basically some of our customers that used to produce their own compounds have transferred production over to us.
On the long term basis, and this means that our market effectively grew and we grew market share, but not so much on the account of the of our competitors know due to post Corona rebound.
We first of all we're we're sold out at least until the end of the third quarter.
And the all of our capacity that we thought would take between one to two years to fill all of our capacity has been filled out and we actually cannot accept the additional orders.
So the unfortunate a weather issue that affects our.
Our competitors. Unfortunately, we're not going to be able to benefit from that too much.
Because we don't have the additional capacity that is necessary or additional capacity has been has been booked up.
Some effect of that may be some additional from additional acceleration and prices.
And we see bromine prices at the record highs at this point so until there's a and we are reaching out for some additional capacity, but in the short time, but and the short term there's.
Under supplier over the demand in the market and so the the short answer to your question is we're not going to be increasing market share. Additionally to what we already did and the next couple of quarters, because we don't have enough capacity to do so.
Excellent. Thank you very much.
Thank you. The next question comes from the line of Tom <unk>.
Please ask your question.
Thanks, very much of the presentation.
And so.
And just thinking a little bit about your position in Brazil and talks.
Talks about critical mass and does that mean mcdonalds shifting now wait from organic growth towards organic growth.
Can you elaborate a little bit more and wait and see this business going over the medium term and I'm really what the compass minerals.
Acquisition crystallize the sport for ICL going forwards, but that would be helpful. My second question is the core.
Total raw material pressure.
Just real products is that the total products that you're using for the the polymer science and now I I wasn't expecting to hear the terminology and and industrial products given the integration into the into the building.
And so the elemental forms.
Yeah that as much of the questions. Thank you.
Yeah, there's some of raw materials that are critical for our some of the flame retardants that we are producing that we saw some shortage and and as a result of the prices have gone up we we see that more of a logistical issue for.
And now it seems like it's lovely now we don't really see the pricing issue there because of basically any.
Any significant price pressure from that side is pretty much rolled over to the ultimate customers.
And so that's our that's the dynamic there, but can you remind me what are what's your first question was.
Okay.
And Brazil, sorry, sorry, sorry, Yeah I was so axa is of great question and I was so excited about answering it.
I lost it so anyway the way to look at it is that the Brazil as are the number one market and the world actually for specialty fertilizers are Brazil, and China account for 70% of the growth of global markets and.
And as our strategy is to become our leaders and this market and were very significant and and Europe and some other regions.
A big component of our strategy is becoming significant and.
China, and Brazil, and China, our strategy of the base, one organic growth and the leveraging some of the capabilities of our joint venture there.
In Brazil in order to reach a critical mass of production and distribution.
And it's not very effective to compete from outside of going into a market that has the volatility and exchange rate and the local inflation.
So it was clear that we need the significant production and distribution and Brazil.
And we targeted a few companies and Fortunately for us.
Because all the stores came into place we.
Our acquiring are the leading player in the in Brazil, and the pretty much of that makes our dream come true and this M&A as the basis.
For all of our business in Brazil. So.
Some of our some of our traditional business and Brazil will be consolidated into this new acquisition and we have for Lockwood, that's playing and the bio stimulants niche of of the market and on that foundation.
We intend to focus on organic growth and Brazil, because both of the these businesses are growing at double digit rates.
They have great distribution.
Distribution and great product.
We're going to add to that additional capabilities that we bring from our ICL and that can enhance the organic growth and although.
There is some non Brazilian sales are very very little and there's potential based on existing products to grow that we're first and foremost going to I'm going.
Going to grow our focus on growing the business in Brazil, and I guess the way to look at it is.
The market, we're targeting the global market as the 14 billion dollar market growth is in China, and Brazil, and China were executing successfully organic growth, Brazil, the only way to do it given the currency inflation etcetera is the to get critical mass through <unk>.
M&A and.
And we're lucky enough to acquired the best company out there leader and the market.
And so we that currently have about the 6% of global market are going to get to 9% and close to 10%.
Through this a new acquisition actually the two acquisitions, but mainly the recent acquisition and Brazil.
And our leadership strategy is.
It has to do with becoming leaders in Brazil. This acquisition will make us leaders and Brazil and from this point forward.
Sales are direct the farmer and that's very unique and the world of the specialty fertilizer and we intend to capitalize on that.
Okay. Thank you very much thanks for the like a cup and thank you okay.
The next question comes from the line of Joe Jackson of being the Cat.
The to market and please ask you a question.
Hi, This is the framework down for Joe and Thanks for taking my question is ICR, looking and minimizing potash times to China, and diverting them to the higher price markets and said are and they're not much flexibility of there.
The first of all yes, and and the current market conditions and makes more sense for for us the so elsewhere and.
We expect though the the conditions and China will improve because there's a significant disparity between the formal import price and the local price I think there's of spread of over $100. So we think that there will be rationalization, there probably before the year is over.
And so we expect a new contract negotiations towards the end of this year.
And in the meantime to make sure that you'll get your answer yes will divert some of the.
China product elsewhere.
Okay. Thank you and then just on price I'll send out at the sales body and will continue to ramp there is the isn't it it is profitable, yes, and if not what makes happen to catch profitability.
The business is not profitable yet we still we're producing at a rate of little lower than a million tons and we need to get the over a million tons, we feel that that'll happen this year.
The other side of it is that we need to demand the higher premium on the selling price and currently is happening.
And we expect that this will evolve over with some more time as a premium is deserved for organic fertilizer and we see we're getting those premiums and in Europe, not so much and and other territory. So we're still challenge to demand the kind of prime.
And that we need in order to try and the business profit to profitability.
But uhm, but we are making we are making advances and we feel that we're we're going and the right direction.
Thank you.
Thank you.
And given high level of inventories and automotive it's taken some time to get down the supply chain. So we've only felt that recently and most of the first quarter was soft but from this point forward for the rest of the year, we see it with the with C. B C automotive fully recovered oil and gas and.
Is we we think it's not gonna completely recover until the end of the year.
We have a very profitable line of clear by and fluids and to give you a sense of of what has changed it's gone down from over $50 million last year to a little over $30 million. This year and the first quarter, which means that we've had a drop of $21 million and sales and.
Which account for about 40% of the total sales, it's actually much better than a quarter of two ago. I think we had a quarter and I don't remember if it was the second or the third quarter, but the total sales or like three or $4 million. So it has come up but and and some regions of the world completely.
But we expect that the recovery will take until the end of the year.
I do admit that we didn't expect world prices to rebound so quickly.
[laughter].
Okay, and I need to call.
Thank you.
The question please press.
Kind of thing.
And if you wish to cancel your request.
And the next question comes from the line of.
Question.
Hi, This is John writer on from Mark So you've talked about how the automotive business has recovered and nicely, but producers are continuing to talk about the <unk> sure. Just do you have any view of whether the issues automakers are facing will and packed here and demands maybe later on this year.
It's difficult to say because as I mentioned, there's a lack of two or three quarters of between whatever happens and the Ed and market of automotive until we we feel it but I think part of what we're feeling is I'll also of certain shift to E V. A.
The electric vehicles demand more electronic components that need flame retard and so I think it's also not just the issue of total size, but also of the mix of the new the new demand for the product.
It's a partial answer but it's Billy all I have.
Alright, and that's helpful. And then can you just give us a little more color on the uhm phosphate specialties growth and where are you sick of the growth will come over the next year, both and and product and geography.
Sure you know we've said many times before that our strategy was to get from about 45% to about 70% specialties and the mix and.
And this quarter and we plan to be over 60%, but the because of the a good thing because of the rise and commodity prices and we ended up at 54% I believe so we're growing steadily the specialty business is the driven.
Mainly by growth and our food related innovation, which which is actually not just phosphate some of it is phosphates and and some of it is alternative protein.
And the business the that business is growing at the at a rate of about 10% right now and the EBITDA of the specialty business is currently about 13%. So it's it's a healthy business of despite the the <unk>.
Relatively large investment and innovation, which we hope will bring good results for the future. Despite that the investment it's still 13% EBITDA business growing on the on the strength of food innovation, partly phosphate and.
Partly alternative protein the the industry the industrial specialty products of.
As shown a slower growth almost no growth this this quarter, but the.
Uhm technical grade technical grade White was four of gossip is was up nicely.
Okay. Thank you very much.
Thank you.
The next question comes from.
Please ask you a question.
The Kobe.
Congratulations.
And I wanted to know about.
Potash.
Could you talk a little bit about the strength of the.
And the upcycle that you talk.
Talk about what you expect the demand side.
Oh, yeah and.
And that kind of of how you see the supply dynamics going forward and the next day actually is the town.
Thank you sure.
First of all of you know what I'd like to use your question to call out that I guess and the past the company's growth of performance was completely dependent on put ash prices and.
And I sort of you know one of call out that if you look at the result of this quarter. Then you know put ash prices went up by 3%, but if you look at the four divisions put us came and number three.
And in fact, if we happen to be a little late by about two weeks on the start of the connection of the ramp and Spain and so our production Hall started late so we had better than expected results and Q1 by the way we will have a little less than we wanted and.
And Q2 because of that.
If that hadn't happened put us would of been fourth fourth out of four divisions now that's that's the good news for ICL, because our our strategy focusing on specialties is really coming through and we've created we we've created the growth that we can live with for the.
For the year's the we plan until 2025, when we intend to reach sustainable double digit growth. So bromine based on long term contracts and new developments in agriculture additional capacity M and a and product innovation food.
I already talked about and phosphate and food already talked about and and now put ash. There's the the two things that we're doing one is you know we increase the capacity and the dead Sea, we we finalized and April of the connection of the ramp and space. So we're poised to get to a million times this year and and we'll go to the one.
Point $3 million of capacity within the next two years and and Luckily in terms of timing everything is coming together and put us prices are showing strength resilience I would say, we were selling and Brazil, just a little over a year ago with the.
$200, a ton and now $365 and I think prices and Brazil of gone up by almost $100 just and the last three of four months.
So the the dynamics of the pricing of put us look to be going up as you know where of price ache or and this market. So we can say the the demand.
And is expected to be around 68 million tonnes. We read from the same sources as you do and we think that that number of seems reasonable and.
On the on the supply side, it's really a matter of discipline of Canadians Russians as I said, we're a price taker and it seems that as I mentioned, Brazil, and and you know the U S of course, and India now with a new contract and hopeful.
We will have the better China settlement by the end of the year it looks that put us prices and fertiliser prices and general have to follow ultimate the ultimately have the follow grain prices and average of grain prices have gone up by 100 per cent over the past year. It doesn't look like.
They're slowing down and some some countries are increasing reserves.
So all of those factors uhm allow us to be optimistic and believe that the pricing for the next.
Year, or two looks to be and the right direction and hope that answers.
Very helpful.
Kind of cancellations on the quarter and.
A lot of work.
And the last few years.
Thank you very much.
We have no further questions at this time please.
[noise], we'd like to thank you all for joining us on our first quarter call and we look forward to talking to you again after the report second quarter earnings.
The day.
The conference.
And.
[music].