Q2 2013: Financial Results. Mr. Stefan Borgas President & CEO. August 7, 2013 P. 1

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1 Q2 2013: Financial Results Mr. Stefan Borgas President & CEO August 7, 2013 P. 1

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. P. 2

3 Overview Solid Results in a Challenging Environment STRONG CASH FLOW AND MODERATLY LOWER MARGINS. H compared to H1 2012: sales up 0.1% to $3.4bn, operating income down 14.1% to $756M, net income down 10.8% to $622M Q2 2013: $1.8bn sales, $393M operating income, $316M net income FERTILIZERS: strong volumes and lower prices INDUSTRIAL PRODUCTS: weak flame retardants demand, strong performance in other businesses in an environment of soft prices PERFORMANCE PRODUCTS: slightly improved results despite worldwide economic uncertainty P. 3

4 Outlook FERTILIZERS: Announcement on change in potash market dynamics creates pressure on potash margins Long term fundamentals have not changed INDUSTRIAL PRODUCTS: No recovery in the flame retardants expected for H No change in electronics markets expected PERFORMANCE PRODUCTS: relatively stable outlook P. 4

5 Business Environment P. 5

6 Billion Tonne Stock-to-Use Ratio Still Significantly Lower than Long Term Average Stocks of Grains and Pulses Barley, corn, millet, mixed grain, oats, rice, rye, sorghum & wheat Sources: USDA, (Update July 2013) Consumption Production Stock to Use 38% 36% 34% 32% % 28% 26% 24% 22% % 18.87% 20% 18% % 16% P. 6

7 Electronics: Industry Indicators are Volatile, No Improvement Yet in Flame Retardants Shipments Book-to-Bill Ratio for North American Rigid PCBs Global Semiconductor Shipments ($M) Bishop World Connectors Confidence Index Sources: IPC Association, SIA Semiconductors Industry Association, The Bishop Report P. 7

8 Increase in Oil & Gas Drilling Strengthened Global Demand for Bromine Products 4,500 4,000 3,500 3,000 2,500 2,000 1,500 World-Wide Rig Count Source: Baker Hughes Rig Count, July 2013 P. 8

9 Performance Products: Market Conditions Global and US GDP Middle Class Consumption across all emerging markets USD trillions By 2025, consumption of middle class in emerging markets is expected to be bigger than today s top 6 country consumption (U.S., Japan, Germany, U.K., China, France) % p.a Demand for ICL PP s products and services, which are targeted at a broad range of markets, is linked to GDP Source: FAO, OECD Source: World Bank, Global Insight; Bird of Gold; Team analysis Expected growth of the middle class throughout the world will increase adoption of Western diet, increasing calories, protein and processed food consumed P. 9

10 Financial Results Mr. Avi Doitchman Executive VP, CFO & Strategy P. 10

11 H Compared to H $ millions H1 13 H1 12 % change Sales (CIF) 3,411 3,406 Gross profit 1,377 1,439 Gross margin 40.4% 42.2% 0.1% (4.3%) Operating income (14.1%) Operating margin 22.2% 25.8% Net income to the Company s shareholders (10.8%) P. 11

12 Q2 13 Compared to Q2 12 & Q1 13 $ millions Q2 13 Q2 12 % change Vs. Q2 12 Q1 13 % change VS. Q1 13 Sales (CIF) 1,770 1,907 (7.2)% 1, % Gross profit (14.5)% 659 9% Gross margin 40.6% 44.1% 40.2% Operating income (26.8)% % Operating margin 22.2% 28.2% 22.1% Net income 316 to the Company s shareholders 408 (22.4)% % P. 12

13 Q2 2013: Bridge Analysis Sales Operating Profit ,907 1, P. 13

14 P. 14 Results by Segment

15 Sales and Operating Income by Segment Other 2% ICL Performance Products 13% ICL Performance Products 22% Potash 30% ICL Industrial Products 12% ICL Industrial Products 19% Phosphates & Fertilizers 27% Phosphates & Fertilizers 14% Potash 61% Q Sales* $1,770 million Q Operating Income $393 million * Sales to external customers only P. 15

16 Q2 2013: Fertilizers Bridge Analysis Sales Operating Profit P. 16

17 Q2 2013: Industrial Products Bridge Analysis Sales Operating Profit P. 17

18 Q2 2013: Performance Products Bridge Analysis Sales Operating Profit P. 18

19 P. 19 Financial Overview

20 Lower Yet Strong Returns 94.5% 52.0% 53.1% ROE 22.4% 31.2% 38.0% 31.4% 29.5% 23.2% 40.4% 35.5% 10.9% 8.1% 33.5% 10.4% 10.5% 5.5% 4.2% 5.5% 5.3% 9.6% 14.4% 12.9% 19.1% 19.4% 21.4% 25.8% 22.3% ROIC * 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 * LTM P. 20

21 Strong Q2 Cash Flow Delivery $ millions Q2 Q * 2006 figures are based on Israeli GAAP, are based on IFRS P. 21

22 More than a Decade of High Dividend Yields Year Dividend Yield* % % % % % % Dividend policy: Up to 70% of net income in quarterly payments 2013 Dividend Payments Q1: $213 million announced on May 13, 2013 Q2: $221 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. P. 22

23 Macroeconomic and Industry Parameters Which Affected Q Results (average Q2 13 compared to average Q2 12) 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) Decrease in Bulk Dry Freight Index (BDI) -5.3% 2.0% 0.3% vs. 0.5% last yr -12.7% P. 23

24 Macroeconomic and Industry Parameters Which Affected H Results (average H1 13 compared to average H1 12) 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) Decrease in Bulk Dry Freight Index (BDI) -3.5% 1.4% 0.3% vs. 0.5% last yr -21.5% P. 24