ICL Group Ltd (ICL) Earnings

Management highlights

- Overall Financial Performance * ICL delivered a strong start to 2026, with consolidated Q1 sales of $2 billion, up 14% year-over-year; adjusted net income increased 26% to $139 million (11 cents adjusted EPS); adjusted EBITDA rose 15% to $412 million; adjusted EPS improved 22% year-over-year. * Operating cash flow was $195 million, up 18% year-over-year, with free cash flow of $61 million in the quarter. The balance sheet remains strong, with $1.5 billion in available liquidity and a stable net debt to adjusted EBITDA ratio of 1.5x; Fitch and S&P reaffirmed ICL's BBB- rating with a stable outlook. The company continues to distribute 50% of adjusted net income as dividends, with a $69 million Q1 dividend and a 3.7% trailing 12-month dividend yield. - Strategic and Operational Milestones * Continued executing on growth strategy for specialty crop nutrition and specialty food solutions; completed acquisition of ~50% of a biotech ingredients business. * Successfully navigated operational challenges from the ongoing Middle East conflict, maintaining strong overall production levels with minimal disruption. * Implemented production improvements to drive operational efficiencies across the global portfolio; the YPA China joint venture delivered improved efficiencies and reduced fixed costs in Q1. * The sales process for ICL's BulBee UK operation remains ongoing. - Macro Market Context * Global inflation declined slightly quarter-over-quarter in Q1 2026, with interest rates stable across all major regions; the Israeli shekel strengthened against the U.S. dollar, creating a headwind for ICL's Israel-based operations (as a dollar-denominated company) that is only partially mitigated by hedging. * Crop grain prices trended up in Q1 but remain significantly lower than year-ago levels; U.S. farmer sentiment has declined, with fertilizer affordability at its lowest point since 2021, and high input costs cited as the top concern by 46% of farmers.

Guidance

- Management raised its 2026 full-year consolidated adjusted EBITDA guidance by $100 million, now projecting full-year EBITDA in the range of $1.5 billion to $1.7 billion, driven by expectations that elevated bromine and potash prices will persist through the year. - Full-year 2026 potash sales volume guidance is maintained at 4.5 million to 4.7 million metric tons, reflecting ongoing operational improvements at Dead Sea and Spain operations implemented in 2025. - Management expects the 2026 full-year adjusted tax rate to be approximately 30%.

Segment performance

1. Industrial Products: First quarter sales were $349 million, a slight year-over-year increase, with EBITDA of $86 million up 13% year-over-year. This segment accounts for approximately 17.5% of total consolidated Q1 2026 revenue. Bromine prices hit their highest level since Q4 2022, with bromine-based flame retardant sales growing on higher prices and stronger electronics demand; phosphorous-based flame retardant sales were soft due to weak construction end markets. Clear brine fluid sales decreased as Gulf of Mexico oil and gas activity shifted from Q1 to Q2. Specialty minerals (magnesium, calcium carbonate, salt) delivered higher year-over-year sales on increased food and pharma demand, with strong deicing salt sales from severe winter weather in North America. 2. Potash: First quarter sales were $503 million, up nearly 25% year-over-year, with EBITDA of $172 million up more than 45% year-over-year. This segment accounts for approximately 25.2% of total consolidated Q1 2026 revenue. Average Q1 potash price was $362 SIF per ton, up 20% year-over-year and 4% sequentially. Production volumes hit 1,177,000 metric tons, up 11% year-over-year, driven by improved equipment availability and reduced downtime at Dead Sea and Spain operations. 3. Phosphate Solutions: First quarter sales increased 18% year-over-year to $679 million, with EBITDA of $131 million. EBITDA was pressured by over 100% higher sulfur raw material costs. This segment accounts for approximately 34% of total consolidated Q1 2026 revenue. Commodity phosphate demand varies by region with significant price volatility accelerated by the Middle East conflict. Specialty phosphate benefits from ICL's diversified multi-region production, as customers prioritize secure, reliable supply chains. Specialty food solutions within this segment grew, driven by new customer additions, expansion in China, and the Bartek ingredients acquisition, with double-digit new business growth for Dairy Plus products in North America and processed meat category growth in China. 4. Growing Solutions: First quarter sales increased 11% year-over-year to $551 million, with EBITDA of $49 million up 4% year-over-year, even as higher raw material costs impacted results. This segment accounts for approximately 27.6% of total consolidated Q1 2026 revenue. Specialty fertilizer sales grew on higher volumes (mainly China and India) and higher prices; Europe saw growing sales and profitability from mix optimization, Asia posted robust top-line growth but flat gross profit, North America had stable profitability with flat sales (higher prices offset by lower volumes from a delayed spring planting start), and Brazil faced lower sales and gross profit from global uncertainty, competition, and a less profitable product mix. ICL opened a new 30,000 metric ton annual capacity specialty water-soluble fertilizer facility in India this quarter to expand local manufacturing and meet growing regional demand.

Risks & headwinds

- A stronger Israeli shekel versus the U.S. dollar created over $20 million in negative currency impact in Q1 2026; if the shekel remains strong through the second half of 2026, this negative impact will become more pronounced, even with existing hedging strategies. - Raw material costs, particularly for sulfur, have spiked (sulfur prices more than doubled in Q1) and availability is constrained, with 50% of global sulfur supply originating from Gulf states, creating ongoing uncertainty that may pressure margins across multiple business segments. - The ongoing Middle East conflict has created market volatility, accelerated fertilizer price increases, and contributed to reduced fertilizer affordability, which has weakened farmer sentiment and could impact agricultural nutrient demand going forward. - Phosphate demand may see some destruction in 2026 due to the combination of tight supply and elevated prices driven by China's ongoing export block and high sulfur costs. - A delayed spring planting season in North America created lower near-term specialty fertilizer volume in the region, and ongoing global uncertainty and competition pressure results in the Brazilian market.

Analyst Q&A

• Q: Ben Toirer (Barclays) asked for an update on current phosphate market dynamics across commodity and specialty segments, including demand trends and any signs of demand destruction amid high raw material costs. /

  A: Management confirmed that sulfur prices are skyrocketing with ongoing availability issues, leading some competitors to cut production. ICL currently sees solid phosphate demand, but will need to increase prices to offset higher sulfur costs, so demand may weaken for the rest of the year. ICL is less exposed to ammonia price increases than peers because it holds a smaller share of the DAP/MAP commodity market. China's ongoing export block for phosphate is keeping global supply tight, which will create some demand damage, but ICL expects to be able to sell its full production despite the price environment.

• Q: Toirer followed up asking if the $100 million full-year EBITDA guidance increase is predominantly driven by stronger potash pricing and volume momentum. /

  A: Management confirmed this assumption is correct, and also noted that bromine prices are also expected to be higher than original forecasts for the full year, with better demand than initially projected, contributing to the upward guidance revision.

• Q: Lawrence Alexander (Jefferies) asked what structural productivity levers ICL can pull to generate fixed cost savings over the next 3-5 years across its portfolio. /

  A: Management stated that significant structural productivity improvement projects are already in motion across ICL's operations, with visible improvements already at potash operations in Israel and Spain, and phosphate sites running at full capacity. Management declined to share detailed targets at this time, noting that the company prefers to report results as improvements are realized, but expects these projects to deliver meaningful long-term tailwinds for profitability.

• Q: Alexander asked about ICL's sensitivity to sulfur costs, and whether phosphate pricing will catch up to sulfur price increases to offset margin headwinds. /

  A: Management explained that sensitivity varies by product, but there is a strong correlation between sulfur prices and phosphate margins. Phosphate pricing has only partially caught up to the sulfur price increase, not fully offsetting higher costs, and prices are not expected to rise enough to fully offset the spike. ICL is continuing full production while carefully managing sulfur purchases and inventory, and all current sulfur risks were already incorporated into the upward guidance revision, with management continuing to monitor the situation closely.