ICL Third Quarter 2026 Earnings Call - International - EVOGENE LTD

Explicit Guidance:

• FY2026 Consolidated EBITDA: Reiterated range of $1.5–$1.7 billion, with management targeting a position ahead of the midpoint ($1.6B+), reflecting anticipated impacts from high raw material costs and currency headwinds.
• FY2026 Potash Sales Volumes: Expected between 4.5 and 4.7 million metric tons, supported by operational improvements implemented in 2025.
• FY2026 Adjusted Tax Rate: Projected at approximately 30%.
• Dividend Policy: Continuation of distributing 50% of adjusted net income to shareholders.

Business-Segment Outlook:

• Industrial Products: Expects strong Q4 2026 and sustained 2027 performance driven by bromine price rebounds to Q1 2027 levels and continued demand growth in electronics (AI infrastructure, robotics) and construction sectors.
• Potash: Fundamentals described as "constructive and strong" for 2027 with healthy global demand; Q4 2026 expected to be stable with no dramatic changes versus Q3, though contract mix to India/China may continue to pressure destination pricing.
• Phosphate Solutions: Anticipates significant improvement in 2027 as lower sulfur purchase prices (down ~12% in Oct vs. Q3) flow through inventory lags to Q1 2027 earnings. Expects demand growth for phosphate fertilizers in 2027 as farmers resume purchasing after 2026 affordability constraints.
• Growing Solutions: Focus on capitalizing on "good-for-you" consumer shifts and regional expansion; expects 2027 performance to improve as the weak Brazilian agribusiness season (high season in H2) passes, with long-term commitment to Brazil's 25% GDP agricultural sector.
• Segment Restructuring: New organizational structure effective Jan 1, 2027, consolidating: (1) Food/Health/Wellness into "Nutrition Solution"; (2) Industrial Phosphates with existing Industrial Solutions; (3) Commodity Phosphates and Potash into "Essential Mineral"; (4) Growing Solutions remains distinct.

Market and Competitive Outlook:

• Demand Trends: Global demand for food/agricultural products expected to grow over coming years driven by population growth; grain prices in the U.S. trending up, improving farmer sentiment.
• Pricing & Supply: Sulfur prices declining from record highs in Aug 2026; potash prices relatively stable with potential upside in 2027 as China replenishes inventory. Phosphate fertilizer prices expected to soften slightly in 2027 as sulfur costs drop.
• Supply Chain: Continued supply and logistics constraints anticipated in key regions; ocean freight rates remain subject to geopolitical uncertainty but are being managed actively.

Macro / Industry Outlook:

• Sulfur Market: Major headwind for FY2026 Q4 due to lagged consumption of high-priced inventory, but purchase price reductions in late 2026 are expected to significantly benefit FY2027 margins.
• Currency: USD strengthened vs. ILS in Q3 and Oct; management expects to continue using hedging strategies to mitigate Israel-based operational cost impacts from shekel strengthening.
• Brazil Economy: Short-term weakness in H2 2026 due to soft demand and delayed purchasing, but long-term structural position remains strong given Brazil's role as a top global agricultural exporter.

Strategic Initiatives:

• Elevate Cost Transformation Program: On track to deliver >$350M annual EBITDA improvement by end of 2028.
  • 2027 Target: >$150M annual EBITDA improvement, expected to be realized gradually starting Q4 2026 and accelerating into 2027.
  • Levers: ~50–60% from productivity/efficiencies; 30–40% from reduced external spend; 10–20% from SG&A optimization.
• Acquisitions & Innovation: Integrating "Barter" acquisition for bakery/confectionery functional ingredients; leveraging technology for electronic materials and AI infrastructure solutions; advancing biostimulant products to improve fertilizer efficiency.

Risks and Headwinds to Outlook:

• Input Costs: Record-high raw material costs (specifically sulfur) and elevated freight/logistics costs remain primary near-term headwinds for Q4 2026.
• Regional Volatility: Continued soft demand and affordability issues in Brazil could suppress Q4 Growing Solutions results compared to H1 2026.
• Geopolitics: Geopolitical uncertainty remains a risk factor for ocean freight rates.
• Inventory Lag: Delayed pass-through of lower sulfur purchase prices means Q4 2026 P&L will still reflect higher costs despite recent price declines.

Management Tone on the Future:

• Confidence Level: High confidence in achieving the $150M 2027 "Elevate" savings target; described 2027 entry position as one of "strength" and expects it to be "even better" than 2026.
• Resilience: Tone emphasizes "leading with resilience" and discipline; expects to capture upside when conditions normalize in 2027.
• Guidance Shift: Reiteration of full-year 2026 guidance implies stability in expectations despite recent volatility; forward-looking view is optimistic regarding the 2027 turnaround driven by cost savings and commodity price normalization.

Miscellaneous:

• Balance Sheet: Maintains strong liquidity with $2.2B available cash resources; net debt to adjusted EBITDA stable at 1.5x.
• Market Position: Managing "just-in-time" purchasing cycles in global farming regions to capture market share as affordability improves.