Q Results. Mr. Stefan Borgas President & CEO. August 7, 2014

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1 Q Results Mr. Stefan Borgas President & CEO August 7, 2014

2 Important Legal Notes The information delivered or to be delivered to you does not constitute an offer or a recommendation to do any transaction in Israel Chemicals Ltd. (ICL) securities. Although our shares may be bought and sold on the Tel Aviv Stock Exchange (TASE) at any trading time, they do not trade out of Israel - neither in the United States, nor EU,nor elsewhere and this presentation does not constitute an offer or investment advice to any US or other person at this time. If we ever do so, our offer will only be made by a prospectus or a registration statement conforming with all requirements of U.S., EU or any other applicable law. Certain statements in this presentation and other oral and written statements made by ICL from time to time, are forwardlooking statements, including, but not limited to, those that discuss strategies, goals, outlook or other non-historical matters; or project revenues, income, returns or other financial measures. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements, including, among others, the following: (a) Crisis in financial markets;(b) War or terror operations;(c) Impacts on sales of fertilizers (product prices, government policies and weather); (d) Subjection to legislative and licensing restrictions;(e) Exposure relating to environmental protection and safety;(f) Third party liability and product liability; (g) Volatility in the markets that affects the demand for some of the products; (h) Concessions and permits; (i) Natural disasters; (j) Water level in Pond 150 in Dead Sea;(k) Dependence on seaports, transportation and loading in Israel. We caution you that the above list of important factors is not comprehensive. We refer you to filings that we have made and shall make with the TASE. They may discuss new or different factors that may cause actual results to differ materially from this information. All information included in this document speaks only as of the date on which they are made, and we do not undertake any obligation to update such information afterwards. Some of the market and industry information is based on independent industry publications or other publicly available information, while other information is based on internal studies. Although we believe that these independent sources and our internal data are reliable as of their respective dates, the information contained in them has not been independently verified and we can not assure you as to the accuracy or completeness of this information. Readers and viewers are cautioned to consider these risks and uncertainties and to not place undue reliance on such information. 2

3 Highlights & Financial Results Improved demand in fertilizers and some FR markets. Q results impacted by labor interruptions. Operational excellence and efficiency improvements across ICL with expected annual costs reduction of $350M by 2016*. $ millions Revenues Operating income Adjusted operating income** Adjusted operating margin Net income Adjusted net income** Q2 14 1, % Q2 13 1, % % change (13.2)% (80.2)% (39.2)% (78.5)% (33.2)% Q1 14 1, % % change (4.8)% (67.9)% (4.8)% (48.1)% 11.6% * Run rate reduction based on **Adjusted operating income & net income in Q2 excludes past royalty payments at the amount of $149M & 135M respectively as well as the impact of the strike at Rotem at the amount of $15M & $12M, respectively. 3

4 Mining Chemistry Formulation Our Unique Business Model Resources Our Specialty Minerals Our Expertise Segment End Market (% ICL Sales*) Dead Sea Potash Agriculture 52% Bromine Magnesium U.K. / Spain Mines Potash Fertilizers Polyhalite Negev Desert Performance Products Engineered Materials 30% Phosphate Industrial Products Global Opportunities Potash Processed Food 8% Phosphate * Based on 1H2014 external sales 4

5 Business Environment & Major Developments Agriculture Strong demand for granular potash and for phosphate fertilizers. Good indications for 2014 potash demand growth. Lower quarterly potash & phosphate fertilizer sales volumes due to labor interruptions at DSW and continued impact of the Rotem strike. Engineered Materials Solid demand for clear brine fluids, continued growth in brominated biocides and Merquel. Improved demand in several flame retardants market segments. Results impacted by lower bromine prices in Europe and India. Engineered Materials & Processed Food Growth in food driven primarily by the Hagesud acquisition. Results impacted by competitive pressure in phosphate-based downstream products and temporary supply issues in P2S5. Pricing stable to slightly up. The Rotem strike continued to impact the segment results due to availability of raw materials. 5

6 Growth and Cost Reduction Initiatives Agriculture Doc ID England cost reduction and polysulphate opportunity A new multinutrient sulphate fertiliser from Cleveland Potash Ltd Spain consolidation and cost reduction Cost reduction at Dead Sea Works and Rotem Brazil Europe Africa Israel India China Ethiopia Capital investment and an offtake agreement in Allana Potash. Market development Develop new demand for Potash 6

7 A non binding MOU with AkzoNobel, a major producer of specialty chemicals and a leading global paints and coatings company The Deal ICL Iberia Signed Memorandum of Understanding With AkzoNobel Joint production and marketing of 1.5 million tons per year of high quality vacuum salt and 50,000 tons of white potash. Opportunities High value added product with broad applications. Strong synergies A viable solution to the salt by-products of potash. 7

8 Fulfilling Potash Demand Growth Potential First Results in India Potash Demand Growth Potential (Corn Example) Nutrient Usage, Kg per Ha Crop Yield Tonnes, per Ha USA China India Nitrogen Phosphate Potash Yield (kg/ha) Source: USDA, IFA, Justus von Liebig Law of Minimum Importance of Grassroots to ICL Key ICL Initiatives India Potash for Life Providing the much needed evidence of the profitable use of potash. Farmer and publicity activities in 9 states and a total of 36 districts and 720 demonstration plots per year. First results: 15-35% average increase in yields; Success stories demonstrate benefit-tocost ratios between 13:1 and 43:1. Key ICL markets suffer from significant underfertilization and unbalanced application rates. Farmer education is an essential factor in potash demand growth. 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. Incremental Demand Can Result in Material Growth Approx. 250,000 tons of incremental annual ICL shipments required to grow at 5% p.a. Onion - Maharashtra Pomegranate - Maharashtra Wheat - UP Onion - Maharashtra 8

9 Engineered Materials Innovation Essential for Bromine Growth Doc ID New products and applications (portion of sales) 2013 actual: 6% 2018 target: 12% Areas of growth Step-up in R&D, business development investment & third-party R&D to drive growth in the following areas: Water purification Oil and gas drilling Next generation flame retardants Energy storage Meat disinfection Mercury emission control Gold extraction 9

10 Financial Flexibility to Support Growth and Shareholder Return Doc ID Strong balance sheet, cost reduction initiatives and non core divestitures to support investor returns and investment grade metrics during growth period: Balance Sheet under-leveraged flexibility to increase debt while maintaining investment grade metrics Cost reduction $350M by 2016 Non-core divestitures with a potential to generate $ million Redirection of investments from Israel abroad 10

11 Financial Results & Business Environment Mr. Avi Doitchman Executive VP, CFO & Strategy

12 Q Results $ millions Q2 14 Q2 13 % change Q1 14 % change Revenues 1,536 1,770 (13.2%) 1,613 (4.8%) Operating income Adjusted operating income Operating margin Net income Adjusted net income % % (80.2)% % (67.9%) (39.2)% 251 (4.8%) (78.5)% 131 (48.1%) (33.2)% % Operating income in Q excludes provision for royalty payment for Q following the arbitration decision at the amount of $149M and the impact of the strike at Rotem at the amount of $15M. Adjusted net income in Q excludes provision for royalty payment at the amount of $135M and the Rotem strike impact at the amount of $12M. 12

13 Q2 2014: Potash Bridge Analysis Sales ($M) Operating Profit ($M) Q Operating profit excludes non-recurring expenses in the amount of $8M due to a provision following the royalty arbitration decision. 13

14 Potash: ICL s Market Share in the Faster Growing Emerging Markets Jan-June 2014 India imports (total 1.7 Mt arrival Basis) Brazil imports (total 4.6 Mt arrival Basis) China imports (3.9 Mt arrival Basis) APC, 14.4% K+S, Other 2.1% ICL SQM 2.3% BPC Uralkali, 8.5% 6.1% 26.4% 31.6% K+S 2.7% APC 8.1% SQM Other 0.8% 0.4% Uralkali 26.6% K+S 9.6% BPC 18.3% Canpotex 18.5% ICL 13.8% BPC 19.6% Uralkali 20.7% Canpotex 26.4% Canpotex 18.4% ICL 24.5% Sources: China Fertilizer Weekly Market Report, Sindicaro Da Industria DE Adubose Corretivos Agricolas No Estado De Sao Paulo, Company estimates 14

15 Q2 2014: Phosphates and Fertilizers Bridge Analysis Sales Operating Profit Operating profit in Q excludes $9 million impact of the strike at Rotem. 15

16 Q2 2014: Industrial Products Bridge Analysis Sales Operating Profit Q Operating profit excludes non-recurring expenses in the amount of $141M due to a provision following the royalty arbitration decision. 16

17 Q2 2014: Performance Products Bridge Analysis Sales Operating Profit Operating profit in Q excludes $6 million impact of the strike at Rotem. 17

18 ICL Rejects Major Parts of the Natural Resources Committee Recommendations Incorrect calculations: ROA should increase from 11% to 22% Assets should include replacement value, working capital, intangible assets. GT higher than global average: 46-57% VS %. 42% tax rate on OP above 11% return on depreciated assets. Royalties - flat 5% rate. Ignoring different business characteristics between potash, bromine, phosphate and magnesium. The committee ignores the negative effect on GDP, exports, employment, future Government income and foreign direct investments in Israel 18

19 Implications of the Natural Resources Committee $ MM Adjusted Net Income (pro-forma 2013) Current Government Take (1) Discussed Government Take (1),(2) Increase (3) / (Decrease) 1, (160) ICL s Actions Advocacy: Government Lobbying, Challenge Committee s Assessments Legal Actions Operational Business Measures: Cost cutting acceleration, Revaluating certain product lines Strategic Business measures: Cancellation and shifting of investments totalling $1.75B 1 Pro forma for statutory tax rate of 26.5% for comparability purposes 2 Assuming 2013 financial performance adjusted for estimated impact of draft Sheshinski II recommendations, including additional royalties for bromine downstream products 3 Based on bromine & phosphate value chain consolidation 19

20 Thank You

21 Appendices Financial Overview

22 Lower, Yet Strong Returns 94.5% 52.0% 53.1% 38.0% 40.4% 31.2% 31.4% 29.5% 28.8% ROE 22.4% 23.2% 23.4% 10.9% 33.5% 8.1% 10.4% 10.5% 25.8% 5.5% 4.2% 5.5% 5.3% 9.6% 14.4% 12.9% 19.1% 19.4% 21.4% 18.2% 13.3% ROIC * 2014** figures are based on Israeli GAAP, are based on IFRS Data for reflect the application of 2 new IFRS accounting standards 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) ** LTM, operating income is after elimination of about $149 Million relating to prior periods due to the arbitration decision regarding the royalties' issue and an increase in costs due the strike at Rotem, in the amount of about $15 million. Net income is after the elimination of about $135 million in respect of a provision relating to prior periods due to the arbitration decision regarding the royalties' issue and an increase in costs due the strike at Rotem, in the amount of about $12 million 22

23 Q2 14 Cash Flow Delivery $ millions Q2 Q * 2006 figures are based on Israeli GAAP, are based on IFRS 23

24 More than a Decade of High Dividend Yields Year Dividend Yield* % % Dividend policy: Up to 70% of net income in quarterly payments % 2014 Dividend Payments % Q1: $91.5 million announced on May 15, % Q2: $47 million announced on August 7, % % % % % % % % Calculated according to market capitalization based on average share price adjusted for dividends. Dividends attributed to profits of that year. 24

25 Macroeconomic and Industry Parameters Which Affected Q Results (average Q compared to average Q2 2013) Change Appreciation of the NIS against the Dollar Appreciation of the EURO against the Dollar (average for the period) LIBOR Dollar interest rate (3 months) Increase in Bulk Dry Freight Index (BDI) -4.7% 4.6% 0.2% vs. 0.3% last yr 10.4% 25

26 Macroeconomic and Industry Parameters Which Affected H Results (average H compared to average H1 2013) Change Appreciation of the NIS against the Dollar Appreciation of the EURO against the Dollar (average for the period) LIBOR Dollar interest rate (3 months) Increase in Bulk Dry Freight Index (BDI) -5.2% 4.6% 0.2% vs. 0.3% last yr 39.3% 26