ICL Group Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 26, 2025

There are 10 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the ICL Fourth Quarter twenty twenty four Earnings International Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Wednesday, 02/26/2025. I would now like to turn the conference over to Peggy Riley Tharp, Vice President of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, Joelle. Hello, everyone. I'm Peggy Riley Tharp, Vice President of Global Investor Relations for ICL. I'd like to welcome you and thank you for joining us today for our earnings conference call. This event is being webcast live on our website at iclgroup.com and there will be a replay available a few hours after the live call and a transcript will be available shortly thereafter.

Speaker 1

Earlier today, we filed our reports and our presentation with the securities authorities and the stock exchanges in Israel and The U. S. Those reports, as well as the press release and our presentation, are available on our website. Please be sure to review the disclaimer on Slide two of the presentation. Our comments today will contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker 1

These statements are based on management's current expectations and are not guarantees of future performance. The company undertakes no obligation to update any information discussed on this call at any time. We will begin today with a presentation by our CEO, Mr. Radev Zohler, followed by Mr. Abraham Lahav, our CFO.

Speaker 1

Also joining us today is Alad Ahrensen, our incoming President and CEO. Following the presentation, we will open the line for a Q and A session. I would now like to turn the call over to Radeev.

Speaker 2

Thanks, Peggy, and welcome, everyone. Thank you all for joining us for our twenty twenty four annual earnings call. This will be my final call as ICL's CEO and I am pleased to reflect on the past twenty eight quarters to share our results with you once again today. While there are still some challenges related to the situation in Israel, we successfully managed to minimize the impact of war related disruptions throughout 2024 and the situation is getting better now. Please turn to Slide three for a brief overview of 2024, which wrapped up the year of continued market share gains for our specialties driven business.

Speaker 2

Sales were $6,841,000,000 while adjusted EBITDA was $1,469,000,000 dollars representing a margin of 21%. Adjusted diluted earnings per share was $0.38 for 2024. Throughout the year, we maintained our overall momentum despite persistent potash pricing headwinds. For 2024, potash prices decreased 24% versus the prior year. However, our sustained focus on our specialties driven businesses helped drive annual EBITDA up 8% for these three segments Industrial Products, Phosphate Solutions and Growing Solutions.

Speaker 2

In total, our specialties businesses represented 70% of 2024 EBITDA and 73% of fourth quarter EBITDA. As always, we continue to focus on strong cash generation, which resulted in free cash flow of $758,000,000 for the full year. Additionally, we wrapped up the year by delivering a total of $242,000,000 dividend distributions with an industry leading dividend yield of 3.8%. Once again, even in a very challenging year, we delivered a total return ahead of our peers in 2024. We had a number of big wins in 2024 as we expanded strategic relationships and accelerated the launch of innovative new products across all of our specialties driven business.

Speaker 2

We also delivered on our efficiency plans for targeted cost savings. Finally, as I mentioned, we contained oriented disruptions in 2024 and maintained good production levels. Mix. And for 2025, we expect a smoother path overall. I would ask you to turn now to Slide four and to look at some key fourth quarter and full year financial metrics.

Speaker 2

As you can see, we ended the year close to the high end of our upgraded guidance with fourth quarter specialties driven EBITDA of $253,000,000 up 20% year over year. We also delivered an increase in consolidated adjusted EBITDA margin for the fourth quarter, which came in at 22% even as EBITDA decreased by $10,000,000 year over year. Meanwhile, operating cash flow in the fourth quarter for this year was in line with the fourth quarter of twenty twenty three. And in my view, our balance sheet as we head to 2024 was the strongest in recent years. Let's start with a review of our divisions and begin with our Industrial Products business on Slide five.

Speaker 2

For 2024, sales of $1,239,000,000 dollars were up slightly versus 2023 as was EBITDA of $281,000,000 For the traditionally soft fourth quarter, sales were down versus the prior year. However, EBITDA of $70,000,000 improved significantly, up 25% on cost efficiency, while EBITDA margin also showed a dramatic increase and moved up from 19% to 25%. For 2024, we continue to strengthen our partnerships and customer relationships as these long term alliances contribute to our market share gains in accounts. We had another solid year for specialty minerals as sales increased year over year. Annual sales of clear brine fluids, which are used in the oil and gas industry decreased versus the prior year due to drilling cycles.

Speaker 2

However, these may begin to vary in a positive way due to recent policy shifts. Importantly, industrial products delivered a gain in its sales for its phosphorus based flame retardants in the fourth quarter. This business has begun to benefit from new antidumping measures implemented in The EU in 2024 and U. S. Customers are also expected to be influenced by antidumping proceedings now pending in The U.

Speaker 2

S. As a result of this, we saw good customer uptake for our sustainable Veriquel phosphorus based flaring guidance with some key partners already transitioning production lines to this innovative product. In other new product news, industrial products recently unveiled a revolutionary sustainable solution for the treatment of Biofilm. On Slide six, you will see our potash division results for 2024 with sales of $1,656,000,000 dollars and EBITDA of $492,000,000 Our average put ash price was down nearly $100 CIF per tonne versus 23 while total sales volume is down approximately 127,000 metric tons for the same time. In total, we sold 4,600,000 metric tons of potash in 2024 and we expect the benefit from our decision to the first and fourth quarter sales into 2025.

Speaker 2

In Spain, we had record potash production at our Suria site, delivering more than 800,000 metric tons. Despite the war and while somewhat short staffed, we were able to maintain fairly normal potash production levels in Israel. And And while we still continue to face operational and logistical challenges at our Dead Sea operations, we adopted some long term risk mitigation measures for war related infrastructure issues. In 2024, we saw significant improvement in annual cost per tonne at our Spanish operations and in total. For Portage overall, we benefited from our ongoing operational and efficiency efforts in 2024 and we expect to see continued improvements in 2020.

Speaker 2

Turning to Slide seven, in our Fosseid Solutions division, where 2024 sales were $250,002,000 Results in general were ahead of our expectations despite lower life as for our gas prices as we benefited from favorable volume and mix as well as lower raw material costs. Commodity prices were also higher than expected in 2024, but lower versus the prior year. For the fourth quarter, we saw a slight year over year decrease in phosphate solution sales as an increase in external sales did not offset lower internal sales. Annual EBITDA of $559,000,000 also slightly decreased on a year over year basis. However, EBITDA margin expanded to 25%.

Speaker 2

We were able to improve this rate as we prioritize cost savings and production efficiencies through 2024. We also significantly benefited from higher volumes and lower raw material costs. Our phosphate specialties results were aligned with market dynamics as expected. North America and Europe were relatively stable, but remained competitive, while South America was influenced by significant influence from China. Overall, we maintained our focus on market share and volume gains, while delivering new products and expanding our reach, including into cosmetics.

Speaker 2

We're also looking into additional food specialty opportunities, including geographic expansion. And in 2024, we introduced a new alternative dairy solution. Our YPH joint venture in China delivered multiple production records, including another overall record year with continued strong demand for battery grade fossil fuel. One of the strengths of our White PH facility is the ability to flex between customer demand for battery and agriculture solutions, and our team there does an excellent job of optimizing between the two. In North America, we've been hosting customer meetings at our Battery Materials Innovation Qualification Center in St.

Speaker 2

Louis, which became operational in less than one year. For our commercial LFP plant in The U. S, we are now finalizing the detailed engineering process. As mentioned in previous earnings calls, we continue to align this capital spend to match anticipated customer demand timing. For Europe, in January of this year, we signed a strategic agreement with DynaNONIC, currently number two in the world in cathode material capacity to produce lithium iron phosphate at our existing site in C And S.

Speaker 2

Point. While this project is currently only in its planning stages, it demonstrates our commitment to developing high quality solutions for sustainable supply chain. Turning now to Slide eight. In our growing solutions business division, the 2024 sales of $1,950,000,000 dollars were down year over year. EBITDA of $2.00 $2,000,000 increased 70% for the same timeframe, while EBITDA margin of 10 expanded significantly versus the prior year.

Speaker 2

For the fourth quarter, we saw similar improvement in EBITDA, which was up significantly and margin rate, which improved 12% from 3% in the fourth quarter of twenty twenty. Overall growth and profitability was driven by efficiency efforts and improved product mix as well as lower raw material costs. In 2024, the business continued to target market share growth via both M and A and new product innovation. In The UK, we completed a bolt on acquisition toward the end of the year to strengthen our position in the turf and landscape market. While based in The U.

Speaker 2

K, Greenvest is renowned for its specialty granular and liquid nutrition products serving all global markets. In North America, we had record sales volumes in 2024 with strong growth in Mexico and Canada. In Asia, we achieved record breaking annual sales volumes for specialty agriculture and fertilizers. Fourth quarter sales in Brazil were lower than expected due to significant currency fluctuation, tight liquidity and soft soybean crop economics given lower commodity prices in March. However, for the full year, we saw improved profitability and further market share growth in Brazil.

Speaker 2

In 2024, Growing Solutions entered the biological fertilizer business, delivered new product sales of more than $250,000,000 and expanded its R and D efforts and innovation partnerships. I would now like to wrap up with a few highlights on Slide nine. Once again, solid execution from across the entire company helped deliver winning results for ICL. We continue to drive long term growth in specialties driven EBITDA, which meaningfully sets us apart from our commodity based peers. We enhanced our partnerships across three of our specialty driven businesses industrial products, phosphate solutions and growing solutions as we strive to work with the best to achieve our goals and expand our presence globally.

Speaker 2

In some instances, this means extending customer relationships over the long term, so we can both benefit during the good times and weather the bad times together. In other situations, we bring our expertise to our customers to help them succeed. And of course, we are always working to find the best partners to help get our products to market in every region. We made three complementary acquisitions while also driving new product innovation. We will continue to innovate as it is an inherent part of ICL's DNA and one of the key areas that helps distinguish us.

Speaker 2

We advanced our battery material aspirations into Europe and received partnership support as well as government funding. And we remain on track to strengthen our leadership positions in 2025. We are already leaders in bromine and specialty phosphates and we are now moving to the top in bromine solutions by consistently improving our market share and position. As you can see on Slide 10, we delivered shareholder value ahead of our peers once again in a very challenging year for our industry and in spite of geopolitical challenges well beyond our control. In 2024, we also various concession renewal efforts and for the Dead Sea specifically, we provided feedback on a draft government report and participated in Kinesset Committee meetings.

Speaker 2

During 2024, we also successfully settled a large portion of outstanding legal life. We also continued to advance our sustainability efforts and improved our rankings across multiple key global metrics. And finally, on the occasion of my final earnings call with ICL, I want to thank my hardworking and dedicated team spread across the globe. Together, we share in the achievements of the past seven years and I would not have been able to reach this point without the support from each and every ICO employee. Thank you.

Speaker 2

I also want to congratulate Elad Aronson, our new CEO. Elad has earned his promotion by delivering proven business performance and clear demonstration of leadership skills. He is passionate about ICL's future opportunities and he will join us today for a Q and A session so that you can get to know him. Good luck, Elad, from all of your ICL colleagues. And with that, I would now like to turn

Speaker 3

the call over to Avila. Thank you, Aviv, and to all of you for joining us today. Let us get started on Slide 12 and take a look at some key market metrics. As a truly global company serving a variety of end markets, we look beyond fertilizer prices to a wider array of macro indicators. Starting with inflation.

Speaker 3

Our rates were fairly stable with the exception of Brazil, which saw a 40 basis point increase in inflation in the fourth quarter. Looking into January, inflation rates picked up in The U. S, EU and Israel, while China was flat and Brazil decreased slightly versus year end rates. Interest rates increased in Brazil in the fourth quarter, up approximately 150 basis points while rates in The U. S, Israel and India were flat as rates in The EU and UK declined.

Speaker 3

For 2025, quarter to date interest rates are flat to declining for all countries in the exception of Brazil, which saw 100 basis point increase versus the fourth quarter. Global industrial production growth of 2.4% was up approximately 70 basis points in the fourth quarter with quarterly rates expected to be in the 2.9% to 3.3% range throughout 2025. On a sequential basis, fourth quarter housing starts in The U. S. Were up 11%.

Speaker 3

However, they trended back down to third quarter territory in January. Turning to Slide 13 and key fertilizer market metrics. Grain prices were mixed in the fourth quarter with corn up 7% on a quarterly basis, while other crop prices fell versus the third quarter. However, all crops have improved quarter to date in 2025 versus the year end with the exception of rice. Farmers sentiment in the fourth quarter improved dramatically over the third quarter, up more than 50%.

Speaker 3

The positive trend continued into 2025 as U. S. Farmers retained their post election optimism and sentiment rose another five points in January. Potash and fossil prices continued to diverge as potash prices declined again in the fourth quarter while fossil prices increased versus the third quarter. Potash prices stabilized in January while phosphate prices continued to climb, up 4% since year end.

Speaker 3

Like others in the industry, we expect global quota shipments for 2025 to be roughly in line with 2024 with a range of 71,000,000 to 75,000,000 metric tons. While there is a lot of global chatter in the industry, overall dynamics look good for 2025 and potash prices have gone up since the beginning of the year. Ocean freight rates decreased significantly in the fourth quarter, down approximately 22% versus the third quarter. In January, this dropped even further. And for the month daily rate, it lows not seen since early in COVID.

Speaker 3

On Slide 14, you can see some key market metrics for energy storage and electric vehicles and also overall demand trends for technical MAP and LFP phosphate, which continue to grow. For North America, we see expected future demand continue to shift more towards ESS users. For this quarter, we are also highlighting demand in Europe following the announcement of our joint venture agreement with Dynanonex to establish LFP production at our existing site in Spain where we are receiving government funding for our efforts. If you will now turn to Slide 15, for a look at our full year sales bridges, on the left side, you can see the year over year change for each of our business divisions with potash once again having an outside impact on the year over year decrease in sales. However, I would like to point out the positive impact industrial product had on overall annual sales.

Speaker 3

Turning to the right side of the slide, you can see the benefit received from higher quantities and also the impact of lower prices, once again, especially for potash and the effect exchange rates had on sales. On Slide 16, you can see the impact lower potash prices had on our 2024 EBITDA of 1,469,000,000 We were, however, able to offset some of this impact to higher quantities, lower raw material costs and improved production efficiencies. Slide 17 provides a look at our fourth quarter sales bridges with potash once again having the biggest impact. In total, sales for the fourth quarter came in at $16.00 $1,000,000,000 On the right side of the slide, you can see the impact from prices and exchange rates. On the left side of Slide 18, you can see the year over year change in quarterly EBITDA by segments.

Speaker 3

On the right side, the impact from lower prices is apparent with increased quantities and lower raw material costs unable to offset decline in pricing. All told, the fourth quarter of twenty twenty four EBITDA came in at $347,000,000 quite similar to the fourth quarter of twenty twenty three. Turning to Slide 19. Once again, ICL remained a leader in terms of average realized potash price as we continue to maximize the profitability of our cost efficient resources. On Slide 20, I would like to remind you of ICA's leadership position in the global bromine market.

Speaker 3

While bromine prices remain under pressure, the debt C continues to be the most cost competitive source of bromine and accounts for approximately twothree of global supply capacity. If you turn to Slide 21, you can see how our business breaks down on both a regional basis and by division. For the fourth quarter, Asia and Europe were equally represented at 27% of sales, while North, South America were both around 20%. Before we wrap up, I would like to share a few highlights on Slide 22. As Ravi mentioned, our balance sheet is strong, and we ended the year with available resources of approximately $1,600,000,000 Our net debt to adjusted EBITDA rate at quarter end remained at 1.2 times.

Speaker 3

Once again, we are distributing 50% of adjusted net income to our shareholders, which translates to a total dividend of $52,000,000 this quarter, resulting in a trailing twelve month dividend yield of 3.8%. During the fourth quarter, we continue to prioritize cash generation as we do consistently. Throughout 2024, we also remain focused on cost savings and efficiency efforts with results ahead of our expectations. Importantly, we maintain a consistent and disciplined approach to capital allocation, which you can see demonstrated on Slide 23, which is a view I do not typically present. As you can see, we have been able to deliver more consistent performance versus our peers during the risk tenure.

Speaker 3

Thanks to our focus on specialties and cash generation, which has resulted in more predictable growth and fewer surprises. Finally, if you will turn to Slide 24, I would like to update you on our 2025 guidance. For our specialties driven business divisions, which include industrial products, growing solutions and phosphate solutions, we expect EBITDA to be between $950,000,000 to $1,150,000,000 in 2025. We expect potash sales volumes to be between $4,500,000 and 4,700,000 metric tons. And we expect our effective annual tax rate for 2025 to be approximately 30% in anticipation of higher potash prices.

Speaker 3

I would, however, remind everyone that in the first quarter, our potash sales will be more heavily weighted toward our annual contracts with China and India, which are at lower prices than current market rates. Now before we begin the Q and A, I want to thank Ravi for his leadership over the past seven years. I am proud to have served with him, and I look forward to partnering with Allard in 2025 and beyond. And with that, I would like to turn the call back over to the operator for Q and A.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Ben Theurer with Barclays.

Speaker 4

You well, good evening to you. Good morning to the ones in The U. S. Thank you very much for taking my questions. First of all, Ravi, all the best for your upcoming retirement in a few weeks.

Speaker 4

It was a pleasure working with you. All the best and a lot of welcome on your new expanded role from growing solution into CEO. So I wanted to get that off first.

Speaker 5

Thank you, Bill. We appreciate

Speaker 4

it. Great stuff. So two 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 that you've been laying out within the phosphate solutions business. I mean, it feels like it was a very strong 2024.

Speaker 4

It was like one of the more commoditized still exposed ones, but holding in fairly well over 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? That would be my first question. I have a quick question.

Speaker 5

All right, thanks. So, we had the 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 on specialty products has come primarily from expansion with additional innovation. Innovative products would be food products in China where we set up new production facilities for specialties, new products in pharmaceuticals and for cement applications.

Speaker 5

We had a good pipeline in products and we still have a great pipeline going forward into 2025. So we expect, now that prices of white phosphoric acid have stabilized, we expect continued volume growth in 2025. The overall market hasn't grown very much, probably by two or 3%, but, we've grown our market share through volume.

Speaker 4

Okay. Got it. And then just a minor question. I would like to like kind of like understand what's behind that. And it's kind of like just general trade noise, etcetera, related.

Speaker 4

So in your press release, you highlighted that within Industrial Products, you've got better volumes, particularly in Europe because of certain duties on TCPP from China. So just wanted to understand what's behind that and how you think about the, just the general setup on trade disputes, be it between Europe and China, U. S. And China, how you think this is going to play out? And given your global footprint, how you're positioned in a market that seems to be more exposed to certain tariffs or duty risks, going forward?

Speaker 5

Okay. So thanks for that question. We have local production facilities in Europe and in The States that suffered injury from dumping prices from China. The product, the Chinese product is also under threat, meaning that within the next three to four years, you won't be able to use that product anyway because of sustainability issues. And we have a new line product that meets all the sustainability requirements.

Speaker 5

And the injury and the anti dumping taxation that comes with it allows us to replace the Chinese product currently in Europe because the anti dumping has already ruled. And there's an ongoing process in The US which, at least our customers are pretty confident that will end our way because some of them are already considering turning their production lines into with adaptations to using our product. So, the nice thing is that typically anti dumping processes are good for the short term for a year or two years or three years. Here, it's a whole new family of products that we call, Very Quell that will replace the Chinese product and because they meet the sustainability requirements, they will stay for the long run. So, this is a new market opportunity for us that has short term implications for 2025 and more beyond that.

Speaker 5

This is for mainly for construction applications and it's a good development for us. Actually, the P4 based products have been suffering for the past year and a half or so. Construction is also, as you know, has been, has seen a very moderate demand. So overall, gaining market share in the construction application with a sustainable product that will give us long term sales

Speaker 2

with

Speaker 5

a very nice profitability is a very good development for us.

Speaker 4

Okay, perfect. Thank you very much.

Speaker 5

Thank you.

Operator

Your next question comes from Kevin Estock with Jefferies. Your line is now open.

Speaker 6

Hi, thank you for taking my question. I guess, real quick, I mean, have you guys seen any Chinese bromine capacity exiting the market?

Speaker 5

We haven't seen the bankruptcies in

Speaker 2

the

Speaker 5

past three or four quarters. We saw one bankruptcy before that, but we have seen significant reductions of use of capacity, both in China and also in Djibouti. 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.

Speaker 6

Okay. Understood. Thank you. And you touched on some war related issues and then also, sort of tariff impact and trade flows, you guys have more local production. But I guess just I guess wanted to get a sense of how you were thinking about the potentially rapid changes in the, I guess, situation in Eastern Europe geopolitically for you guys

Speaker 2

as it relates to fertilizers?

Speaker 5

So from the perspective of demand, the demand is very solid for all types of major fertilizers. We expect as Ram said before, we expect above $70,000,000 70 million tonnes of potash, anywhere between 70 to 75 this year, which correlates with 2024. And in terms of what's happening in Eastern Europe, we don't expect that changes in the war situation are going to significantly impact things going forward because, Belarusian and Russian product are entering into the market. All other volume is entering in the market. And actually, they have made supply side decisions to limit some of that production coming into, global trade.

Speaker 5

Belarusians announced a million tonnes that are not coming into the market this year. And just recently, a few days ago, Russians also said that they were going to go through make unexpected maintenance operations and also limit some of the supply globally because of, additional domestic needs. So that that and the potential tariffs in, in The US are much more significant than, the change in the war situation in the East. As far as the war in Israel, as you know, it's, we're in a much better situation now. There's, some of the issues we've had had to do with people being on reserve duty.

Speaker 5

And that means, getting out of our maintenance routines. And getting back to our maintenance routines is quite a challenge. And, it'll take us a little more time to be completely back to normal probably until April when we have our annual shutdown and then we can actually finalize some of the processes. So that's a very significant thing. The other thing is of course transporting through the Red Sea, which has been, which has been a real, a real, problem to solve during the past recent months.

Speaker 5

I was trying not to say problem, to say challenge, but it's been a problem. And, of course, things look a lot better now. So, supply chain, maintenance production, Red Sea, all those things are looking much brighter for next year. And of course, put ash prices are down, trending up like we expected at the end of the year. And, coming back to the beginning of the question, the, Ukraine Russian conflict is not going to be a major issue for global supplies.

Speaker 5

I'll just ask my colleagues if they want to add in if I miss something.

Speaker 7

I don't think there's anything there.

Speaker 5

Okay. Hope that answers.

Speaker 2

Thank you. Thank you.

Speaker 5

Thank you.

Operator

Your next question comes from Joel Jackson with BMO Capital Markets. Your line is now open.

Speaker 6

Hi, good evening. Hi, Joel.

Speaker 3

It's been such a pleasure working

Speaker 6

with you all these years. Good luck in your next chapter.

Speaker 5

Thank you very much.

Speaker 6

A couple of questions for me. You obviously reiterated your specialty guidance 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 three or four months ago when you gave your initial specialty guidance but which should reiterate like I said I imagine you have a better potash outlook now than you did a few months ago. Is that fair?

Speaker 5

We have a better outlook on pricing, if that was the question.

Speaker 6

Exactly. Okay.

Speaker 5

On pricing and It

Speaker 2

was. Yeah. I'm sure.

Speaker 5

We,

Speaker 2

Yeah.

Speaker 5

Look, what we have now is that prices are trending up and they've actually gone up about 15% in The US in the past month and a bit. And it looks like, Chinese and Indian contracts are 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 would be, it would be too early for that at this point.

Speaker 7

Maybe to add or maybe if I may. Please go ahead. Hi, Joel. It's Abraham. Just to add that, we need to clear out of the way existing contract that we have.

Speaker 7

So the the average price which will be obtained, in q one is, is not necessarily indicative of the better effective prices that we will have going forward. That you always need to take into account that there's a pipeline that we need to clear first. After that, of course, we're all watching and seeing the same things, and there is good potential that prices will go up as we all know.

Speaker 5

And to give more flavor, typically at this point, which is February, we'd be sold out at least until the June. And we're not even sold out until the May and not because we don't have orders or demand, we have plenty. But every time we close a deal, we feel sorry that we didn't wait another week. So we're trying to manage that carefully and maximize our price opportunity at this point.

Speaker 6

Would you say your lag is

Speaker 2

three months in the price book versus what we're seeing in the benchmark in the market? Two months, four months? What would you say is kind of lag?

Speaker 5

It's hard to say. It's mixed because in some geographies, it's way more than two or three months like in China because it's annual contract. And in The U. S, it's probably less than a month. So I would say mix probably less than a quarter.

Speaker 6

Okay. And then finally, we're obviously seeing I think that we're seeing a lot of like incremental interest in ESS even than what a lot of battery industry people might have thought six months ago, twelve months ago. I think we're seeing ESS related lithium demand, for example, up 40%, fifty % CAGR. Can you talk about what's going on in secondary storage, things you're seeing versus three months ago, six months ago? Like is this turning?

Speaker 6

What at what rate and how how fast is this going?

Speaker 5

I think there's a lag between government will and futuristic needs of major suppliers and the ability of the supply chain to adjust to the Western incentives, plans, governmental decisions. There's a lot of uncertainty around future policy, etcetera. So, I think what we're seeing is that everybody's looking to see an inflection point to reassess sometime in the next, two or three years. And everybody's trying to time themselves. We ourselves are in the same situation where we're trying to time, our large capital investments, around LFP and not to make them too early before the market is ready to consume our product on the one hand, and on the other hand, not to make mistakes vis a vis potential policy changes that can hurt us.

Speaker 5

So if we didn't have those uncertainties, we would have acted sooner as well. So we understand the reason that the inflection point is not touchable yet. Nobody knows if it's gonna be in two years or in two and a half years or in three years. But ultimately, EVs and storage, the revolution has happened. The threshold of 30%, market share or what has been crossed in enough countries so it's clear that things are happening.

Speaker 5

And the question is, how dominant will the Chinese be? How, how dominant will government regulation be? And I think, there's a lot of, there are a lot of different opinions. But ultimately, it's a matter of it's all a matter of timing. The demand is there, so it's just a matter of the timing and behavior of commodity markets.

Speaker 2

If I

Speaker 6

may follow-up on that with one more on the same topic, would you say if you look at LFP demand for EVs versus LFP demand for ESS, would you say the transparency of the EV situation, EV dynamic is both much more transparent and it's much less transparent ESS. Would you characterize it that way?

Speaker 5

Maybe the insight that I can bring into the picture and you can see it on one of the Ron slides was that, The US is more dominated by, by non EV storage and Europe is much more, EV storage. And, EV also, there's no united policy for all of Europe. So, maybe things will happen faster at the at the country level. But that's the main difference between, EV and non EV storage. Very high demand in The US, less, and more EV in Europe.

Speaker 5

Wanna pitch that? Just one thing is,

Speaker 7

Joel, you need to, or we need to also understand that the end market for ESS, a static one, and EVs, which is basically private citizens, is quite different. So, on the ESS side, I think it's, it's small. Let's let's put it this way. It's it could be more of a straight line in EVs. There's many questions.

Speaker 7

By the way, geographies can be quite different. And, you know, I've been told in in certain meetings, not internal. It's internal that the the golden number is that in Europe, for instance, they need to get the car below the €25,000, benchmark as in price. Also, people are still, you know, they need to see how the cars age and what it means, etcetera. And so the EV market, the regression line is, as Aviv said, it's very clear, but the round is there can be quite a lot of bumps.

Speaker 7

That's the way we see it right now.

Speaker 5

And there was also a significant shift to LFP technology. So, I mean, as a raw material provider for material, we, were actually selling a lot more this year than we sold last year due to the and it's not because the overall market for CAM material has grown much, it's because the market share for LFP has increased considerably and that's also a factor in everybody else's plans.

Speaker 6

Thank you very much.

Speaker 5

Thank you, Joel.

Operator

Your next question comes from Laurenti Alexander from Jefferies. Your line is now open.

Speaker 8

So good morning. 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 did or in other words, you know, to what extent are you seeing competitors ramp up capacity in response to the market opportunity? It's

Speaker 5

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 fourteen or fifteen months.

Speaker 5

And it could be more because we're not going to supply cathode material before the cell factories are ready to produce. So, that is the timing that is necessary. Some of it in some of that in The U. S. Has to do with the adaptation of the adaptation to non Chinese technology, which is not trivial.

Speaker 5

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 technology. So for us, for example, the safest way is to partner with number two 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, and The US market moves slower than we, than we, expected at the beginning. And it all has to do with, with making certain that, that, we acted in a disciplined way with our CapEx and with our strategy.

Speaker 7

I think, Lawrence And

Speaker 8

if I may just,

Speaker 2

can you Please. Go ahead.

Speaker 7

No. No. Lawrence, go on. Go ahead, Sabila. If you have another follow-up on the LFP side, then ask it and then I'll try to answer.

Speaker 8

So it was just I just wanted just to touch on kind of the investment cycle for you. If you for you from going from the decision to go ahead with a new tranche of LSP capacity to being fully qualified in commercial, can you give a sense for what that timeframe is compared to the time frame it takes for the customer to convert their capacity to be able to use your non Chinese supply? And in other words is your investment loop shorter or longer than the customer's decision qualification warranty loop? Do you see what I'm getting at?

Speaker 5

Yes, I do. And I think the answer is that for customers that are already in the market and producing cells, The the cycle is much shorter than some of the very large OEMs that have not done that yet. So, the question is who is the customer? The timing, once you have the technology and you have a qualified, you have a qualified product, it takes anywhere between eighteen to thirty six months in order to have production set up after all the testing and the ramp up and everything else. And it may be shorter with an experienced customer and longer with a non experienced customer and also longer if you're using a new technology versus proven technology.

Speaker 5

So obviously, to set up a new plant based on most advanced technology partnering with DynaNONIQ is, less complicated than, setting up a new plant with a new technology that, that's working for the first time in the

Speaker 3

in the world.

Speaker 9

Please go ahead.

Speaker 7

I think, Lawrence, it's, the picture is, to some degree, more complicated because, currently, the non Chinese, car manufacturers are not having a great success, you know, one after the other. And there are many reasons. Part of it is the is obviously the cost points, the points of they can sell. Second is they're still trying to retrofit existing, gasoline or diesel cars into electric, whereas the Chinese basically built a car around a computer and battery. And I believe if you look at the whole ecosystem of the non Chinese car manufacturers, what they would have to do in order to survive is take a fresh look at the full design of the cars they are talking about.

Speaker 7

Of course, they will have to hit certain price points and it's quite an effort that they need to go to. I'm sure we even know what I'm saying for the industry. And therefore, I believe that now touching to what Aviv said, that looking left and right, what we need to do is obviously do all the preparatory, steps in order to have the shortest way once we decide to go to manufacture. But other than that, be very watchful. What is our entry point when we start putting in the big dollars?

Speaker 7

And this is exactly what we're doing.

Speaker 5

And as far as The U. S. Is concerned, just so we don't get fixated on EVs, stationary storage is our primary opportunity and also, from the perspective of, the expected timetable.

Speaker 8

Perfect. Thank you. Thank you for the extra detail.

Speaker 5

Thank you. Thank you.

Operator

There are no further questions at this time. I will now turn the call over to Raviv Zola for closing remarks.

Speaker 5

Okay. So I want to thank you for joining us again for our conference call and ICL is entering 2025 in a good way. Some of our markets are stabilized. Some of our markets are looking up. The worst situation is more or less behind us and we're getting back to normal.

Speaker 5

We're going through a management transition and, it looks like we've managed through it in a good way. Very proud to give the reins over to our very talented, Elad Arunsun. And I suggest that, in order to start your tradition, maybe you'll finish this conference call thanking our employees and of course, introducing yourself, saying a few words. So please a lot and thanks to all of you for it was it's been great working with you and iSales is a great company. It's a privilege to be part of it and it's a privilege to launch shares

Speaker 7

in the company.

Speaker 9

Thank you, Ravi. And hello, everyone. I'm happy to be here, happy and excited to be here. I'm with ICL for the last four years, mainly focus on fertilizers. Those days I'm in my learning phase onboarding process, which will be completed soon.

Speaker 9

I'd like to take this opportunity to thank Ravi for the significant transformation ICL has undergone under his leadership and specifically for the support you provided to me also in this onboarding phase. And my last comment is to say thank you very much for the entire ICL employees all across the globe, which are responsible for those results. And I'll be with you in the next quarter. Thank you.

Speaker 5

Thank you very much, everybody.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.

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Earnings Conference Call
ICL Group Q4 2024
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