Investor Presentation -...
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Investor Presentation
March, 2015
Safe Harbor
All statements in this communication, other than those relating to historical facts, are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended These forward-looking statements and projections are not guarantees of future performance and are subject to a number of assumptions, risks, projections and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such statements or projections. Important factors that could cause actual results to differ materially from our expectations include, among others: loss or impairment of business licenses or mining permits or concessions; natural disasters; failure to raise the water level in evaporation Pond 5 in the Dead Sea; accidents or disruptions at our seaport shipping facilities or regulatory restrictions affecting our ability to export our products overseas; labor disputes, slowdowns and strikes involving our employees; currency rate fluctuations; rising interest rates; general market, political or economic conditions in the countries in which we operate; pension and health insurance liabilities; price increases or shortages with respect to our principal raw materials; volatility of supply and demand and the impact of competition; changes to laws or regulations (including environmental protection and safety and tax laws or regulations), or the application or interpretation of such laws or regulations; government examinations or investigations; the difference between actual reserves and our reserve estimates; failure to integrate or realize expected benefits from acquisitions and joint ventures; volatility or crises in the financial markets; cyclicality of our businesses; changes in demand for our fertilizer products due to a decline in agricultural product prices, lack of available credit, weather conditions, government policies or other factors beyond our control; decreases in demand for bromine-based products and other industrial products; litigation, arbitration and regulatory proceedings; and war or acts of terror. More detailed information about factors that may affect our performance may be found in “Risk Factors” in our registration statement on Form F-1 filed with the U.S. Securities and Exchange Commission on September 22, 2014. Forward-looking statements and projections represent our views and are given only as of the date of this communication and we disclaim any obligation to update or revise them, whether as a result of new information, future events or otherwise, except as required by law.
This presentation includes certain non-GAAP financial measures as defined by SEC rules. We have provided a reconciliation of those measures to the most directly comparable IFRS measures, which is available in the Appendix.
2
Unique Business Model Supports Strong Cash Flow Generation & Return of Capital to Shareholders
Unique Portfolio of Mineral Assets
Fully Integrated and Diversified Value
Chain
Leading Positions in Concentrated Global Markets with Strong Fundamentals
Negev Desert, Yunnan*
U.K. / Spain Mines
Dead Sea
Fertilizers
Industrial Products
Performance Products
Min
ing
Ch
em
istr
y
Form
ula
tio
n
Potash
Bromine
Polyhalite
Potash
Phosphate
Magnesium
Agriculture
Processed Food
Engineered Materials
Global Opportunities
Potash
Phosphate
3
52%*
31%
8%
* Based on full year 2014 external sales
67%*
15%*
18%*
* Based on full year 2014
EBITDA
Efficiency improvements of $350M by the end of 2016 Growth opportunities
*subject to deal closure
Integrated Value Chains Provide Significant Synergies and Logistics Advantages
4
The Negev
Desert - Israel
Phosphate Fertilizers
Fertilizer Grade
Phosphoric Acid
Food Grade
Phosphoric Acid
Salt (NaCl)
Phosphate Salts
Pure Magnesium
Magnesium Alloys
Compound Fertilizers
Salt (NaCl)
Potash
Specialty Fertilizers
Chlorine based Biocides
Bromine Compounds
Magnesium
Chloride
Solution
Magnesium
Chloride
Raw Materials
Potash
Potash Mines -
UK & Spain Sylvanite
Crude
Magnesium
Fertilizers Industrial Products Performance Products DSM Product Sold
End Brine
Elemental
Bromine
Phosphate
Rock
Chlorine
Elemental
Phosphorus
Special
Grade Acid
OPFRs & Others
Magnesia
Products (MgO)
Source Major Intermediate & Finished Products
Wildfire Extinguishers
Food Additives
Phosphorus ( Penta)
Sulfide
Polysulphate
Carnallite
PCL3 POCL3
The Dead Sea -
Israel
Global Potash Assets to Support Growth
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ICL IBERIA
ICL UK
Potash Cash Cost Curve – FOB $ / Tonne, Excluding Royalties*
ICL AFRICA
Allana Potash (Ethiopia) 16.4% Equity investment;
Option to increase to 37% Option value: increase
stake only if return is attractive for shareholders
Offtake agreement Attractive economics Production expected
within less than 5 years The first potash mine in
Africa
ICL Dead Sea ICL’s largest and lowest cost
potash asset with near-infinite reserve life
Ability to stockpile outdoors (low cost)
Close to ports and key end markets Ongoing operational efficiency
measures, including labor reduction
Potentially subject to new tax and royalty regime in Israel as of 2017
ICL Iberia Strategically located $435M investment in growth and
efficiency: Facility consolidation- maintaining
capacity, reducing costs per tonne Gradually increase capacity to 1.4M
tonnes in the next 5 years while reducing cost per tonne by ~25%
Potential to further expand capacity by additional 1M tonnes by 2024
Additional 1M tonnes expansion - subject to feasibility study
ICL UK Close to Teesside Port –
access to Northern Europe Increase annual polysulphate
production from 130,000 to 600,000 tonnes (capex: ₤38MM)
Improve capacity utilization while reducing costs per tonne
Co
st
Potash volume *Source: CRU Potash Cost Report 2013 Edition (December 2012), McKinsey & Company, ICL estimates
ICL DEAD SEA c. 2/3 of ICL’s effective
capacity
Potential to increase total capacity by at least 2 million tonnes in the next decade, while reducing costs
World’s Largest Elemental Bromine Producer
The Dead Sea integrated operations provide the highest concentration of Bromine which supports its world leading cost position
Access to Largest and Richest Known Source of Bromine
Grams/Liter
0.02 – 0.03 0.03 – 0.05
0.5 – 0.9
3.5 – 4.5 2.5 – 5.5
10.0 – 11.0
UndergroundWells
(China)
Sea Water(China, Japan)
Shallow Sea(Ukraine)
Salt Lake(India)
UndergroundWells (U.S.)
Dead SeaOperations
(Israel, Jordan)
ICL’s leading market position
38%
29%
12%
13%
8%
Other
China
Chemtura
Albemarle
ICL
2014 Estimated Production Capacity
China’s reserves are depleting ICL owns the largest fleet of isotanks
in the world
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Source: ICL estimates, MarketsandMarkets
Phosphate used in phosphate fertilizers, compound and specialty fertilizers as well as food additives
Potential Production Capacity - Israel (bulk products):
• Phosphate rock: ~4.5 million tonnes
• Phosphoric acid: ~600 thousand tonnes
Phosphate – Strengthening our Backward Integration and Geographical Footprint
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Phosphate Volume
2 3
1
Phosphate Cost Curve (abstract model)*
*Source: CRU Phosphate Rock Cost Report, 2014 Edition (January 2014), ICL estimates
Important initiatives in our phosphate business are:
• Almost $30M annual savings due to Rotem production records in 2H2014 and the early retirement plan
• Further gains due to operational excellence expected in 2015
• Efforts to obtain new franchise in Barir field
Strategic alliance with China’s Yunnan Yuntianhua to leverage ICL’s end-to-end phosphate business model
Closing expected by Q1 2016
Resource expansion Existing operations
45.7% 39.3% 15.0%
50.0% 50.0%
100.0%
• World scale phosphate rock mine with ~100mT reserves
• Rock capacity - 2.5mT p.a. • Fertilizers – 850kT p.a. • Phosphoric acid – 700kT p.a. • Specialty fertilizers – 115kT p.a. • Specialty phosphates – 65kT p.a. • Purified phosphoric acid – 60kT p.a.
ICL YTH Group Public
Shareholders
JV
Yunnan Yuntianhua
• Deal value: $452M • Sales increase: ~$550M to ~$700M • EBITDA margins from low teens to
high teens within 5 years • Estimates synergies: $30M p.a.
• Approx. 7.4x EV/EBITDA multiple (year 2)
• Cash EPS accretive in year 2
Fulfilling Potash Demand Growth Potential
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Promoting balanced fertilization to improve economic benefits
680 demonstration plots in 9 states and
over 40 districts
15-35% average increase in yields;
demonstrate benefit-to-cost ratios
between 13:1 and 43:1
Incremental Demand Can Result in Material Growth for ICL Approx. 250,000 tons of incremental annual ICL
shipments required to grow at 5% p.a.
India
600 demonstration plots in 2014
Several hundred additional plots in
2015
Soil fertility mapping
Specialty Fertilizer: Utilizing Growth Opportunities
$770 Million sales in 2014
Faster growing markets, relatively low capex
Strong sales network
Best-in-class R&D / technology
Business Characteristics
Markets
Solutions
Water soluble fertilizers
Control released fertilizers
Liquid Fertilizers
Horticulture Turf Specialty Agriculture
Investment in R&D and branding
Geographies and crops
Supply chain excellence
Ethiopia Offered through value added nutrient mixtures & blends
Food: Leverage Leadership in Phosphate Food Additives for Texture and Stability
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Bakery
Know how platform for texture and stability
Dairy Meat/Poultry/ Seafood
Lower Fat & Sugar
Lower Sodium Beverages
Phosphates
Sourced ingredients
Integrated formulation of
solutions
Customers
Direct sale of ingredients
Sale of solutions
Dairy proteins
Bakery and Cereals
Transforming ICL Food Specialties into a global formulator of texture and stability solutions
Key Milestone in ICL’s Food Strategy: Acquisition of Prolactal – A leading European Producer of Dairy Proteins
Generated ~$520M in Revenue in
2014
2014 annual revenues of approx. €100 million, 200 employees
Market growth approx. 10%/annum
Cash EPS accretive from year one of consolidation with an EV/EBITDA ratio of 9x
Acquisition will contribute substantial sales and marketing synergies
Closing is expected by Q2 2015
Essential protein source in emerging
markets and important ingredient
to health, sports and infant food.
Proteins are easy to digest and are
better absorbed by the human body
Engineered Materials: Bromine, Phosphorous & Phosphates Based Products
10
Phosphorous & Phosphates – Leadership positions in key end markets
Generated ~$860M in Revenue in 2014
Purified & specialty phosphoric acid
Technical and
specialty phosphates
Wildfire
Safety
P2S5 for lubricants, motor
oils and insecticides
Phosphorous
flame retardants Phosphorous
industrial solutions
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* Source: ICL estimates
Faster than market growth driven by:
• Innovation • Advocacy • Substitutes
2014 Global Bromine Volume*
41%
21%
8%
18%
6% 6% Other
Clear brine fluids
Water Treatment
Flame
Retardants
Brominated Organic
Intermediates
Industrial
Areas of Growth
• Water Purification
• Oil and Gas Drilling
• Energy Storage
• Meat Disinfection
• Mercury Emission Control
• Gold Extraction
R&D to drive future growth in the following areas:
Generated ~$730 MM in Revenue in 2014
Bromine - R&D and Market Trends to Support Demand
Strategy Implementation & Recent Developments
ICL’s Efficiency and Excellence Initiatives Contribution – 2014
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Contribution by segment
Contribution by project
Total efficiency and excellence initiatives
contribution in 2014 - $100M
Total annual contribution by 2016 Year End -
$350M
Energy 9%
Procurement 14%
Production, SG&A
efficiencies 62%
Pricing 15%
ICL-PP 15%
ICL-IP 14%
ICL-F 71%
1,196 960
301
35 100
Efficiency initiatives contribution to operating income
Implementing ICL’s Growth Strategy – Additional Milestones
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• A producer of premium solutions for the processed meat industry
Acquisition of HAGESÜD
•Latin America’s main producer of purified phosphoric acid used in our three core markets: Agriculture, Engineered Materials and Food
Acquisition of Fosbrasil
•Cutting edge technologies in firefighting foams and fire extinguisher additives
Acquisition of Auxquimia
•A manufacturing joint venture for the production of a new polymeric flame retardant
JV with Albemarle
•A non binding MOU for a Joint production and marketing of 1.5 million tonnes per year of high quality vacuum salt and 50,000 tonnes of white potash
JV with AkzoNobel
•A developer and manufacturer of specialty products providing solutions for water conservation, water retention and enhanced growth
Acquisition of AmegA
Divestitures on Track to Achieve Net Proceeds $300-500M
* Net proceeds: enterprise value net of taxes
• 2014 divestitures to generate more than $300M in net proceeds*: • Total revenues of divested businesses in 2014 - about $350M with high single digit
operating margin, lower than ICL’s average • Additional divestiture opportunities: IDE, Clearon, ICL PP’s PCG business • Proceeds to be used for growth opportunities in the Agriculture, Food and Engineered
Materials
4Q 2014 Financial Results
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Highlights & Financial Results
• Q4 2014 adjusted operating income excludes a one-time write off in the AntiGerm business ($22M), in Clearon ($40M) and in Medentech ($9M), as well as one-time income as a result of the Fosbrasil financial consolidation ($36M) and a one-time reimbursement from the Strike Fund ($9M).
• Q4 2014 adjusted net income exclude the above (net of tax effect) and a non-recurring tax expense related to investments made by a subsidiary in Europe in prior periods, at the amount of $11M. • Net income in Q4 2014 impacted by higher financial expenses and effective tax rate due to exchange rate fluctuation (mainly dollar appreciation vs. the shekel)
$ millions Q4 14 Q4 13 % change FY2014 FY2013 % change
Revenues 1,403 1,416 (0.9)% 6,111 6,272 (2.6)%
Operating Income 174 123 41.5% 758 1,101 (31.2)%
Adjusted Operating Income 200 218 (8.3)% 960 1,196 (19.7)%
Adjusted Operating margin 14.3% 15.4% 15.7% 19.1%
Net income 85 119 (28.6)% 464 819 (43.3)%
Adjusted net income 108 195 (44.6)% 695 1,012 (31.3)%
Looking into 2015:
Stable demand for flame retardants and bromine biocides will continue. Clear brine fluids expected to be negatively impacted by lower oil prices as of 2H2015
Margin expansion through implementation of cost reduction and selective price increases expected to take effect in 2015
Continued solid demand in phosphates and operational improvements can balance short term potash and Specialty Fertilizers uncertainties
Food Specialties: introduction of new multi ingredient solutions to continue
Acquisitions of Fosbrasil and Prolactal will contribute to portfolio and geographic expansions
Macro-Economic Developments Affecting ICL
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Excess costs in shekel - $1B in USD terms ILS/$ exchange rate today 10% lower than 2014 average Negative ILS/$ exchange rate impact on net income in
2014 will turn positive in 2015
Excess revenues in Euro – $150M in USD terms €/$ exchange rate today 16% lower than 2014 average
Oil prices plunged more than 50% LTM Oil at $50/barrel to contribute $50-100M to ICL’s OP Lower transportation costs in ICL Fertilizer more than
offset negative impact on ICL Industrial Products clear brine fluids business
Ruble/$ exchange rate today 38% lower than 2014 average Mainly impacting ICL Performance Products Food business in
Russia. Moderate impact on ICL Specialty Fertilizers Significant cost advantage to Russian competitors in the potash
and magnesium markets
ILS/$
WTI Crude
€/$
Ruble/$
Financial Position to Support Dividend Yield and Growth Initiatives.
17
(US$Bn)
1.6
2.2 1.9
1.6 1.4
1.6 1.4
1.7
1.2 0.9
0.0
0.5
1.0
1.5
2.0
2.5
2010 2011 2012 2013 2014
Adjusted EBITDA and Operating Cash Flow
Adjusted EBITDA Operating Cash Flow
Committed to a Solid Dividend Policy
Average Cash Flow
Conversion: 78%
(1)
1 Operating Cash Flow adjusted for one-time $108 million taxes paid due to Trapped Earnings Law 2 Average of 2010 – 2014 Operating Cash Flow divided by Adjusted EBITDA 3 Calculated according to market capitalization based on average share price adjusted for dividends. Dividends attributed to profits of that year 4 2014 LTM – dividend as per Q4’13-Q3’14
(2)
Dividend Yield (%) (3)
7.0 5.9
6.4
8.0
3.5
0.0
2.0
4.0
6.0
8.0
10.0
2010 2011 2012 2013 2014 LTM (4)
2010 – 2014 Average: 6.2%
Dividend policy: up to 70% of reported net income
Delivers significant income to shareholders, while maintaining capital allocation discipline
Flexibility to execute growth while maintaining payout ratio:
Solid financial position: 2014 net debt/ EBITDA of 1.98
Cost reductions and efficiency improvements: run-rate $350M per year by 2016
Divestiture: potential of $300-500M in after tax proceeds
2014 LTM dividend was negatively impacted by one-time items in the amount of over $200M
Thank you
Save the Date: ICL Investor Day New York, May 19, 2015
Appendices
ICL at a Glance
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ICL is a leading global specialty minerals company that operates a
unique integrated business model to fulfil essential needs in three
key end markets: Agriculture, Engineered Materials and Processed
Food
Utilizes sophisticated processing and product formulation
technologies to produce downstream / value-added products
Operates low-cost, geographically advantaged assets
~50% of production and ~95% of sales outside of Israel
LTM dividend yield: 8.25% (including special dividend) (2)(3)
Company Snapshot
Key Statistics (3) Our Business Segments
US$Bn
Market Capitalization 9.1
Net Debt 2.6
Enterprise Value 11.7
Main Shareholders Israel Corp 46.2%
PCS 13.9%
2014A 2013A
Revenue 6.1 6.3
EBITDA 1.3 1.6
% Margin 22% 25%
Fertilizers: One of the world's largest producers of potash, phosphate-based fertilizers and specialty fertilizers
Performance Products: Produces, markets and sells a broad range of downstream phosphate-based food additives and advanced additives
Industrial Products: Extracts bromine and magnesium from the Dead Sea and produces and markets bromine, magnesium and phosphorus compounds
19%
18%
15%
48%
Our Business Mix and End Markets (1)
Potash
Fertilizers & Phosphates
Industrial Products
Performance Products 52%
9%
8%
31%
Processed Food
Engineered Materials
Agriculture (Bulk and Specialty Fertilizers)
Fertilizers Segment
Business Mix (Based on 2014 EBITDA)
End Markets (Based on 2014 Revenue)
Other
1 Excludes adjusted EBITDA attributable to Other and eliminations; may not sum to 100% due to rounding 2 Dividend yield calculated as total dividends paid over the last twelve months divided by current market capitalization 3 Market data as of March 30, 2015; Net debt calculated as total debt less cash, cash equivalents and short term investments
ICL Segments, Business Environment, Additional Strategic Milestones
22
Strong Global Presence
22
Europe 39%
Asia 21%
Israel 5%
ROW 3%
North America
23%
South America
9%
Sales by Geography (2014)
Manufacturing plant
Logistic center
Sales offices
Headquarter
Mexico
Leading Positions in Our Markets
23
Potash #2 in Western Europe; #3 in India; #4 in China and Brazil
PK Fertilizers #1 in Western Europe
Specialty Fertilizers #1 Worldwide in MAP / MKP Soluble
Agriculture Fertilizers; #1 in the United States in Controlled-Release Fertilizers; #2 (tied) in
Europe in Controlled-Release Fertilizers
Specialty Phosphates Top 2 Worldwide
Elemental Bromine #1 Worldwide
Phosphorus-Based Flame Retardants #1 Worldwide
Forest Fire Retardants #1 Worldwide
Phosphate-Based Food Additives Top 3 Worldwide
End-Markets Product Rank
Agriculture
Processed Food
Engineered Materials
Source: ICL estimates, see “Presentation of Financial and Other Information” in the prospectus
24
ICL Fertilizers Segment Breakdown
* Based on 2014 external sales of ~$3.1 billion and operating profit of $670 million
ICL Fertilizers sales* ICL Fertilizers operating profit*
Fertilizers & Phosphates
20%
Potash 80%
Fertilizers & Phosphates
50%
Potash 50%
Growth Factors - Fertilizers and Food Products
25
Population Is Growing
Arable Land Is Declining Yield Growth Required to Meet World’s Food Needs
Meat Consumption and Fertilizer Use
Source: FAO
0.0
2.0
4.0
6.0
8.0
10.0
1970 1990 2010 2030F 2050F
Pop (Bn) MM Tonnes of Meat and Nutrient Tonnes
Arable Land per Capita (Hectares) Grain Production (Indexed to 100)
100
125
150
175
200
225
250
1980 1991 2002 2013
Meat Consumption Fertilizer Consumption
0.0
0.1
0.2
0.3
0.4
1970 1990 2010 2030F 2050F
100
200
0
100
200
300
World Crop Production in 2005 – 2007
Crop Rotation
World Crop Production
in 2050
Increase in Yields
Expansion of Arable
Land
+9% +14%
+77%
Source: U.S. Census Bureau, United Nations Source: USDA, meat includes beef, veal, swine, broiler and turkey
Source: FAO
Grains and Pulses: Barley, Corn, Millet, Mixed Grain, Oats, Rice, Rye, Sorghum, Wheat.
World Grains Production & Consumption
Link
16.72%
19.91%
21.14%
16%
18%
20%
22%
24%
26%
28%
30%
32%
34%
36%
38%
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
Bil
lio
n T
on
ne
Consumption Production Stock to Use
Sources: USDA, (Update February 2015)
World Grain Price Futures (CBOT)
$0
$5
$10
$15
$20
$25
CHICAGO BOARD OF TRADE (CBOT) CROP PRICES $/bushel
Corn Wheat
Soybean Rice
Wheat
Corn
Soybean
10.10
3.90
5.38
Rice
10.86
Source: USDA, CBOT. All contracts for March 2015, prices as of Feb. 17, 2015
28
Potash Consumption Outlook in Selected Regions, 2008-2020
3
5
7
9
11
13
15
17
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Brazil China Europe India USA
Source: Fertecon Potash Outlook (December 2014)
Region CAGR 2014-20
Brazil 5.3%
China 4.1%
Europe 2.2%
India 14.4%
USA 2.9%
Potash: Market Fundamentals
29
Source: Equity Research
56
51 53
59 - 61
66 - 67
45
50
55
60
65
70
2011A 2012A 2013A 2014E 2020E
Long-term Growth Drivers
Population growth Increased standards of living and protein consumption Declining arable land per capita
Former BPC 31%
Canpotex 34%
ICL 8%
RoW 27%
Mosaic Co
Uralkali
K+S
Source: Equity Research
Importance of “Grassroots” to ICL
Potash Demand Growth Potential (Corn Example)
Key ICL markets suffer from significant under-fertilization and unbalanced application rates
Farmer education will be an important growth driver
ICL believes it will be a primary beneficiary of such initiatives given its strong position in these markets and the strategic location of its assets
0
2
4
6
8
10
12
0
50
100
150
200
250
300
USA China India
Nutrient Usage, Kg per Ha Crop Yield Tonnes, per Ha
Nitrogen Phosphate Potash Yield (kg/ha)
Source: USDA, IFA
Global Potash Capacity (MT)
Global Potash Demand 2011 – 2020E
30
2014 – A Strong Fertilizer Year
Sources: China Fertilizer Weekly Market Report, Sindicaro Da Industria DE Adubose Corretivos Agricolas No Estado De Sao Paulo, GTIS, Fertilizer Week and Company estimates
2014 Imports to key markets - million tonnes
6.6
3.1
7.6
9.6
2.2
3.6
8.0
4.3
9.1
10.5
2.4
4.0
2013
2014
1 Full year phosphate fertilizers in P205 terms 2 Full year DAP imports
* Percentage may not match the numbers due to rounding
31
Fertilizer Prices
Potash Prices
FOB Vancouver standard KCl
US$/t spot US$/t spot
Average DAP fob Tampa
Average GTSP, fob North Africa
Phosphate Prices
* Source: Fertilizer Week, prices as of February 170, 2015
FOB NOLA granular KCl
0
100
200
300
400
500
600
700
200
250
300
350
400
450
500
550
600
650
32
1
3
4
5
2
ICL Dead Sea – Raw Material Extraction
Pumping and
evaporation process
1
2
3
4
5
1 Israel based on average from Dead Sea to Port of Eilat and Ashdod; Germany based on Werra to Port of Hamburg and Bremerhaven; Canada based on Saskatchewan to Port of Vancouver;
Russia based on Starobin to Port of Klaipeda; Spain based on Cabanasas Mine to Port of Barcelona; UK based on Cleveland Potash, Saltburn-by-the-Sea to Teesport Commerce Park
Advantageous Potash Assets Locations
33
ICL Has Shorter and Lower Cost Shipping Routes to Emerging Markets
Destination (Days) Destination ($/tonne)
Country of Departure Mine-to-Port (km) (1) China India Brazil China India Brazil
Israel ~200 23 11 22 21 15 17
UK ~30 34 22 20 32 27 17
Spain ~85 27 15 17 34 26 17
Germany ~350 34 23 20 30 26 16
Russia / Belarus ~600 39 27 25 24 26 18
Canada West Coast ~1,700 35 47 43 15 26 29
Clear Service Advantage to Developed and Emerging Markets
Low plant gate-to-port costs and ocean freight costs with faster time to markets
Europe
China
Brazil India
US Israel
Source: ICL estimates, Netpas
Strategic Alliance with Yunnan Yuntianhua
34
Financial Highlights Strategic Rationale
Revenues: JV sales to increase from ~$550M to ~$700M
Commodity / Specialty sales volumes ratio to develop from 90%/10% to 50%/50%
Margin expansion: expand EBITDA margins from low teens to high teens within 5 years
JV valuation reflects approximately 7.4x EV/EBITDA multiple (year 2 estimates)
Cash EPS accretive from the first full year of operations
Synergies: at least $30M per year, achieved within 5 years, with a potential to double this amount
Investment in the JV and the listed company: $452 million
CAPEX: ~$350M spread over 5 years starting from the closing
35
Maximizing Efficiency & Growth in ICL Iberia
• Establish a long term capacity increase while significantly reducing the cost per tonne to a near Dead Sea level, with marginal cost per tonne similar to the Dead Sea level
• Significantly reduce environmental foot print
• Approx. $435M investment to consist of:
Step-by-step increase capacity to 1.4M tonnes
Plant output to be almost 100% granular
Double vacuum salt capacity to 1.5M tonnes
Maximize ramp capacity, site & port logistics and infrastructure to support expansions of up to 2.3M tonnes
Perform feasibility study of new brownfield project, aimed to expand production by an additional 1 Mt KCl annually
2012 2015 2020 2025
KCl Production
36
Strengthening and Expanding ICL’s Specialty Fertilizers’ Innovative Technologies
• Based in the UK, established in 1984 • Developer and manufacturer of specialty products for
the specialty agriculture, horticulture and turf & amenity markets
• Products providing solutions for water conservation, water retention and enhanced growth
• Acquisition will strengthen ICL Specialty Fertilizers’ position in specialty agriculture markets, enhancing its supply chain and scaling its operations
Acquisition of AmegA Sciences:
Targeting Growth Opportunities in Specialty Fertilizers
A non binding MOU with AkzoNobel, a major producer of specialty chemicals and a leading global paints and coatings company
Joint production and marketing of 1.5 million tons per year of high quality vacuum salt and 50,000 tons of white potash.
• High value added product with broad applications.
• Strong synergies
• A viable solution to the salt by-products of potash.
37
ICL Iberia Signed Memorandum of Understanding With AkzoNobel
Opportunities
The Deal
38
ICL Industrial and Performance Products Segments serve the Engineered Materials and Processed Food Markets
Flame retardants 35%
Magnesia
8%
Dead Sea
Salts 9%
Microbial Solutions
9%
Industrial Solutions
34%
Food Specialties
34%
Phosphate Salts 13%
Other Products
29%
Other Phosphate Based Products
20% Phosphoric
acid 10%
* Based on 2014 external sales of ~$1.5 billion and $1.3 billion in Performance Products and Industrial Products, respectively.
Industrial Products* Performance Products*
Specialty Minerals
39
Engineered Materials: Drive Bromine Market Growth A
Opportunities
The Deal
Agreement Between ICL & Albemarle:
Establishment of a manufacturing joint venture for the production of polymeric flame retardant
• The JV will operate an existing 2,400 MT per year plant in the Netherlands and a 10,000 MT per year plant in Israel, which is now starting up
• The transaction, subject to certain closing conditions, including regulatory approvals, is expected to close in 2015
• ICL’s FR-122P to replace the HBCD flame retardant which is being phased out in different countries
• Offering environmentally-friendly, fire safety products based on exclusive license from Dow Chemicals
• Additional capacity to meet the market growth needs
• Lower risk as well as lower costs due to economies of scale. The JV will create the largest producer of the companies’ polymeric FR
40
Expand Footprint in Brazil: Completion of 100% Acquisition Of Fosbrasil for ~$65M
• Latin America’s main producer of purified phosphoric acid
• More than $100M in sales, 90 employees
• Benefits:
Almost 50% increase of ICL’s purified phosphoric acid volumes
ICL to become South America’s market leader in specialty products for Food, Engineered Materials and Specialty Fertilizers
Synergies utilization and improved competitiveness
• Based in Germany
• Producer of premium spice blends and food ingredients for meat processing
• Processed meat formulation & specialty distribution channel
• Acquisition expands ICL’s portfolio of tailored, functional solutions
Premium Solutions for the processed meat industry
Expand Food Value Chain into Specialty Processed Meat Market
41
Acquisition of HAGESÜD GROUP:
Next step in executing food growth strategy
Latest Financial Results:
4Q 2014
43
Q4 2014 Results $ millions Q4 14 Q4 13 % change FY2014 FY2013 % change
Revenues 1,403 1,416 (0.9)% 6,111 6,272 (2.6)%
Operating Income 174 123 41.5% 758 1,101 (31.2)%
Adjusted Operating Income 200 218 (8.3)% 960 1,196 (19.7)%
Adjusted Operating margin 14.3% 15.4% 15.7% 19.1%
Financial Expenses, net 66 6 156 27
Net income 85 119 (28.6)% 464 819 (43.3)%
Adjusted net income 108 195 (44.6)% 695 1,012 (31.3)%
174 200
108
71 36
9
43
23 38
12 Adj. Net Income Bridge Analysis
44
Potash Bridge Analysis
Sales ($M) Operating Profit ($M)
465
431
12
35
11
Numbers may not add due to rounding
140 128
12 2 4
24 6
45
Phosphates and Fertilizers
Sales ($M) Operating Profit ($M)*
356
385
7
30 8
* Q4 2013 operating income was impacted by a provision for early retirement in Rotem, in the amount of about $60M, while Q4 2014 operating income is excluding a one-time
reimbursement of $8M from an insurance award in connection with the strike in Rotem.
9
37 9
7
5
15 8
Numbers may not add due to rounding
46
Industrial Products
Sales ($M) Operating Profit ($M)
305 313
17 8 1
25 30
14 1 4
3 2
Numbers may not add due to rounding
47
Performance Products
Sales ($M) Operating Profit ($M)
Numbers may not add due to rounding
376 363
23
4 23
17
35 26
5 13
48
Lower, Yet Strong Returns
10.9% 8.1%10.4%10.5%
22.4%31.2%
23.2%
31.4%
94.5%
29.5%
38.0%
53.1%
40.4%
28.8%
21.0%
5.5% 4.2% 5.5% 5.3%9.6%
14.4%12.9%19.1%
52.0%
19.4%21.4%
33.5%25.8%
18.2%13.6%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013* 2014
ROIC
ROE
ROE (Return on equity) = net income / shareholders' equity, average
ROIC (Return on invested capital ) = (operating income ×(1-0.20)) / ((trade receivables + inventory – trade payables) + PP&E, net), average * Operating income is after elimination of non-recurring effects: provision for early retirement at Rotem, provision for removing waste at Bromine and
impairment of assets at ICL-IP. Net income is after elimination of non recurring tax effects (mainly, tax in respect of release of trapped earnings in 2013 annual results, provision for early retirement it Rotem, provision for removing waste at Bromine and impairment of assets at ICL-IP in Q4 ‘13)
2000-2006 figures are based on Israeli GAAP, 2007-2014 are based on IFRS
Data for 2012-2013 reflect the application of 2 new IFRS accounting standards
Data is based on adjusted operating and net income
49
Operating Cash Flow
$ millions
2006 2007 2008 2009 2010 2011 2012 2013 2014
75 91 206 239 220 142321 192 16791 177
461 400 521
284
376425
119119147
717
242370
499
716
394
29575
150
475
319
427
344
314
116
313
Q4
Q3
Q2
Q1
* 2006 figures are based on Israeli GAAP, 2007-2014 are based on IFRS
360
565
1,200
1,727
1,127
1,269
1,538
1,859
895
Net debt to EBITDA (as of end-2014): 1.98X
1 ROIC : after-tax operating income (assuming effective tax rate) divided by invested capital (net debt plus shareholder equity plus minority interest). K+s and Uralkali– based on last reporting period 2 Market data as of Feb, 2015; Represents dividends divided by current share price. 3 Includes $500MM special dividend 4 Calculated using 5 year average EBITDA (2010 – 2014). Uralkali and K+S - 2010-2013.
Leading Cash Returns
50
(%)
8.3
3.8 3.4
1.9 0.9
2.0
0.0
2.0
4.0
6.0
8.0
10.0
Average: 2.4%
Current Dividend Yield LTM (2)
(3)
Source: Company filings, filings of competitors
22
18 18
15 15 17
10
15
20
25
30
Average: 17%
2010 – 2014 Average (%)
Return on Invested Capital (1)
1.8x
2.8x
1.8x
1.2x 1.4x
0.0
1.0
2.0
3.0
4.0
Average: 1.8x
Total Debt / EBITDA – ICL vs. Peers (4)
(3)
Baa1 / BBB A3 / A- Baa3 / BBB- BBB Ba1 / BBB
Shareholder Return – Sheshinky to Feb 17 2015 (1) (6.6%) 5.3% 6.2%
January 2005 to Sheshinski (May 1 2014) 417% 341% 228%
Cumulative Capex on Capacity Expansions ($Bn) (2) 1.05 8.5 3.5
Expansion Capex / Market Capitalization 12% 28% 18%
% Increase in Potash Production 2007 - 2014 2% (5%) (11%)
Free Cash Flow Conversion (3) 31% 37% 18%
Key Financial Highlights
1 USD share price plus dividends 2 Expansion and growth capex from 2008 – 2014 (source: company reports, ICL estimates) 3 2010 to 2014 performance; Free cash flow conversion calculated as free cash flow divided by EBITDA;
Free cash flow calculated as cash flow from operations less capex and cash acquisitions
Additional Key Topics
Our Future Priorities
52
“One ICL” • Harmonize IT systems and management processes, share best practices
• Identify and reward top performing employees
Grow Our Core Businesses
• Seek and evaluate opportunities with a potential to double our phosphate scale
• Expand our potash minerals assets and outperform potash market growth by educating emerging
market farmers on the benefits of potash
• Continue to pursue high-return “bolt-on” M&A opportunities in phosphates, food additives and specialty fertilizers
• Drive demand growth through innovation in downstream bromine and phosphate-based products
• Expected to increase R&D by 30% by 2019
Improve Our Cost Position by $350MM
by 2016 (1)
• Streamline potash and phosphate operations to reduce cost per tonne
• Implement efficiency improvements across our global processes
Grow Shareholder Returns
• Committed to a dividend pay-out ratio of up to 70%
• Maintain commitment to return of capital to shareholders
• Optimize best-in-class ROIC and free cash flow generation
Maintain Strong Flexible Balance Sheet
• Maintain investment grade credit metrics
• Maintain current level of capex while substituting maintenance capex with growth capex
• Divestitures of non-core assets should contribute $300-500 million
1 Run-rate reduction based on 2013
Implications of the Natural Resources Committee
53
Legal Actions
Operational Business Measures:
Cost Cutting Acceleration in Bromine Compounds and
ICL Dead Sea,
Revaluating the Magnesium Plant Closure
Looking Forward
Advocacy:
Challenge Recommendations within
Policy Makers
Strategic Business Measures:
Cancellation of $0.75Bn and Review of $1.00Bn of Capital
Expenditures, Shifting Investments Outside
of Israel
ICL is taking significant mitigation measures:
Final recommendations were approved by the government. 2015 elections delays the process.
Changes to the potash tax system will not come into effect prior to January 2017
Natural Resources Committee Final Recommendations Key Points
25% tax when RODA* is between 14-20%, 42% tax when return is 20% or above
Fixed 5% royalty pay-off for all natural resources
Phosphate royalties will be paid based on ex-mine value
5% of working capital to be deducted from the financial statements operating profit
Determine a unique mechanism for bromine regarding the transfer price
The benefit of the Sylvinite production in the magnesium plant will be recognized as an expense for the potash plant. Uncertainty regarding the contribution for the bromine production
* Return on depreciated assets
Global Leader in Climate Change Mitigation
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High Scores by the Carbon Disclosure Project (CDP) Outscoring Peers*
Organization Disclosure Score
Performance Score
Mosaic 99 A
ICL 98 A
Syngenta 97 A
K + S 93 C
Agrium 81 C
PotashCorp 80 C
Monsanto 76 D
BAGFAS 44
Not received (disclosure score too low)
Uralkali 40
Not received (disclosure score too low)
For the second year in a row, ICL has maintained its high score of 98/100 in the Disclosure Score and in 2014 achieved the top “A” performance score, acknowledging ICL’s major efforts to both manage and reduce it’s GHG emissions
Both scores are among the top 10% of scores of all global companies in 2014, and place ICL in the CPLI, an exclusive index of companies that are excelling in climate change mitigation
The combined scores are the second best score among global fertilizer-producing companies
ICL has been recognized as a World Leader in managing and reducing Greenhouse Gas Emissions and mitigating Climate Change
* Source: CDP Database, October 2014
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ICL Branding Website
Launched globally on Jan 27
Available in 7 languages!
Demonstrates our vision and strategy
The thinking behind the brand story The brand’s graphic and textual language
ICL new site names search engine
The website offers:
Branding examples & ICL brand book
ICL “Minute to 8” video clips
And more!
Visit the website: www.iclbranding.com