ICL Group Ltd (ICL) 2016 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to the ICL analyst conference. (Operator Instructions). Now, without any further delay, I would now like to hand the conference over to your first speaker today Limor Gruber, Head of Investor Relations. Please go ahead.

Thank you, Cat. Hello, everyone. Welcome, and thank you for joining our second quarter 2016 analyst meeting and conference call. Earlier today, we filed our second quarter report to the securities authorities and the stock exchanges in the US and in Israel. The reports as well as the press release are available on our Website.

For your reference, this meeting is being Webcast live at www.icl-group.com. There will be a replay available a few hours after the meeting, and a transcript will be available within 48 hours.

The presentation that will be reviewed today was also filed to the securities authorities and is available on our Website. Please don't forget to review slide number 2 with the disclaimer.

Our comments today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are not guarantees of future performance.

Today, we will start with the presentation of our CEO Stefan Borgas, followed by Kobi Altman, our CFO. In addition, ICL Executive Committee members are here. And we will all be happy to answer your questions following the presentation. Stefan, please.

Thank you, Limor. Good morning, good afternoon, good evening, ladies and gentlemen around the world. We are joined here also for the last time by our outgoing Chairman Nir Gilad. Nir, so happy to have you at the table, even though it's very, very sad that it's the last time.

Let me make a few comments to the quarter. And I will start with slide number 3 in the deck that you have hopefully all been able to download or follow in the WebEx. Under the circumstances, this has been an excellent quarter for ICL. I'm saying under the circumstances because the commodity business, which we have [subsumized] mostly in our essential minerals division, continues to be under severe pressure, prices in both potash and phosphates as well as volume pricing, and an excellent business because our specialty solutions division has had a 15% growth year over year. And this we think, at least in the order of magnitude, is a sustainable growth rate for the upcoming quarters as well.

We have also, despite the severe pressure in the commodity markets, been able to deliver again free positive cash flow. Our CFO, since he has joined ICL more than a year and a half ago, has put big emphasis on cash flow delivery. The organization is starting to understand this everywhere. We can see it in working capital behavior. We can see it in CapEx. We can see it in maintenance. We can see it in the other balance sheet items. I think we owe a very special thank you to Kobi on this one because this is truly a capability that ICL is now building to become a world-class company.

Slide 4 gives you a little bit more of visibility on the two different businesses. In the essential minerals business, the market environment continues to be very, very competitive. Potash volumes remained relatively low. We shipped a little bit more than 1 million tons of potash, mostly in the Western world. Europe was quite satisfactory, and also, Brazil was okay, but of course, nothing in China, almost nothing in China and India in the second quarter because of the contract negotiations.

It seems to us now that, after the contracts have been signed in India first and then in China, that there's a little bit of relief in the potash market. Materials are flowing very nicely now. Stocks are quite low in the supply chain all around the world. And we can also see positive pricing trends, although it's early to make a full judgment, but in Brazil, we can see $20, $30 improvement. In the US, we can see $10, $20 improvement. In Southeast Asia, we can see the same. So, it seems like this has relieved some of the pressure.

In -- on the phosphate side, there's no volume issue, but there is a continuous pressure on prices, 30% to 40% lower prices depending on the products and depending on the regions, initiated we think by a reaction of the global market leader through the very strongly increased Chinese prices in -- Chinese quantities, export quantities, in 2014 and much more in 2015.

As a result of this, our joint venture in China also ran into difficulties. It made a operating profit loss in the second quarter, but that loss was almost entirely attributed to April. In May and June, the restructuring measures that we have introduced very aggressively at the beginning of this year when we saw the environment deteriorating are starting to grip so that we expect no more losses in this operation in the second half of this year.

In the specialty solutions, this is much more fun to talk about this business in ICL. At this moment in time, we have very strong performance in the industrial products business unit, which is the bromine and the phosphorus business, higher volumes, lower raw material cost, efficiency gains from all the measures that we have done last year, new -- good contribution from new products. Much is going well in this business. We see good stable bromine prices throughout the rest of the year, maybe one or other increase here or there.

In China, there was the expected summer downturn in the prices, but by a much lesser extent than in previous years. And the trend has already turned now in recent weeks, so nothing to worry about, at least we think. So, the phosphorus part of the flame retardants business is more difficult here. There's more of a competitive environment around the world due to, again, pressure from China.

The specialty -- the advanced additives business unit, this is the downstream phosphates that are going into the industrial markets and our specialty minerals, also were -- had a very, very good quarter. The specialty minerals were very strong. Our fire safety business was very strong. And our oil additives business also were very strong.

Here, very happy on how this works, despite the fact that there is quite a bit of price pressure in the commodity phosphate salts or the more commoditized phosphate salts, both in North America as well as in Mexico -- as well as in Europe.

The food specialties business continues to have a very good growth trajectory. Unfortunately, margins are not yet moving up. Profit also increases, but margins are not yet moving up because the growth on the top line and on the portfolio gets counterbalanced to a certain extent with price decline on the more commoditized phosphate salts, similar effect than we see in the advanced additives area. We think this has come to the bottom, but we're not very sure when this will increase. So, we are careful about the projections on this part of the food business.

But, the food business as a whole had a good quarter, Russia very strong, CIS very strong. The food growth trends, new solutions, tailor-made formulations, protein enrichment wishes of customers, clean label wishes of our customers, more natural, more simple, less processed food, nonallergic, all of these trends help our business, and this is what's driving it.

Our specialty fertilizer business is the fourth business unit in the specialty solutions area, had some light and shadow. It suffers, of course, under the dramatic down price decline in the commodities. This makes it much more difficult to sell specialties to farmers because the value add is smaller. And it's tougher to prove that more expensive product is adding value.

So, this leads to decline in prices in some regions. But, the operational and the sales stability that we have in this business unit is quite amazing. There's some geographical expansion that's starting to happen, especially in China. But, also, the resilience in the home markets is quite good wherever we have true specialty offering.

If we translate this now into the balance of the Company, you can see that we're now half specialty, half commodities in the -- on the sales side. On the profit side, we already went too far. Our objective is to have 50% of our profits come from specialties by 2020. We already are 64% this quarter. Quite frankly, this is for the wrong reasons because it's not for the expected long-term strength of the specialties business yet because we wanted to grow more. It's for the weakness of the commodities. So, we like the numbers, but we don't like the reasons behind.

On the next slide number 6, you can see actually the value of our strategy. The red line on both sales and operating income shows the stabilizing effect of the evergrowing specialty business in ICL to the entire franchise. And the blue line shows the commodity volatility that we have, which is in the downturn right now.

In my last slide today, we have summarized again our projections for both of the parts of ICL. The -- no, sorry, for the specialty solutions business. We expect this to continue to grow with an average CAGR of 5% to 10% per year over the course of the next five years and with an above -- with a higher growth in profitability, of course, because we're starting to get the lever effect of the SG&A structures that we have built up over the course of the last one or two years. And we get also here some benefits from new product portfolio, which are higher margin, and from efficiency measures, which give us a little bit better operating margins.

So, overall, our strategy's working. I'm happy with the quarter. And we're looking forward to a second half year which should have relatively similar pattern than the second quarter that you have seen, maybe with the exception of phosphates in China, which will look better.

But, on potash, the volume growth will come for sure that everybody expects. Most of it will be eaten up by lower pricing, unless this careful trend that we're seeing now will continue. And then of course, we have some upside. We will be very happy to report upside. But, in our internal expectations, we expect flat essential minerals profitability and continued rising specialty solutions profitability.

Kobi, please give us the details of the breakdown in the businesses.

Thank you, Stefan. Good day, everyone. The second quarter performance demonstrated again how valuable our backward-integrated value chain strategies. Our specialty solutions division provided a balancing effect to the challenges our essential minerals division faced.

Another important contribution to this quarter's operating income came from our operational excellence initiative. We are pleased to show improvement in practically all parameters in this quarter versus the first quarter of this year, although the business environment is not less challenging.

Please note that, in these two bridges as well as in the following bridges and following slides, we separated the 2015 strike impact on sales and operating income in order to simplify your analysis and make the picture clearer.

Lower potash and phosphate prices negatively affected our financials. We didn't sell potash to China in second quarter. And that impacted the overall volumes we saw. Lower volumes also on phosphate fertilizers and the noncore businesses we sold since the second quarter of 2015 were also a factor, but to a lesser extent.

The negative impact of prices was partially compensated by lower phosphates, some of it due to external factors, such as lower sulfur prices [in sum], and more importantly, our results of our efficiencies and cost-saving efforts.

G&A expenses increased this quarter compared to the second quarter of 2015 by less than 5%, due to the newly added expenses at our Chinese joint venture. Net of this item, the actual comparable expenses decreased by 4%. We are working to continue this trend. And our target is to reduce overall G&A in 2016 by around 10% versus 2015 and with further reduction targeted for 2017.

Our CapEx level this quarter is consistent with our target of approximately $650 million for this year. We had another quarter of solid positive cash flow generation supported by stable operating working capital requirements, despite the higher sales versus last quarter, and by our cash flow optimization efforts. We expect cash flow to be lower next quarter, but for all good reasons, as we are selling higher volumes, and our receivables will increase accordingly.

Moving to the next slide, slide 10, and in this quarter, we are reporting you in the new structure of the two divisions. We filed a few weeks ago comparison figures that you can see in our Website that will give you also comparisons to future years and future quarters and not only the last quarter, as we have in the report.

This slide, slide 10, presents the results of our essential minerals division. The rough upstream market conditions in which we operated during this quarter, as well as the first quarter this year, are reflected in the negative impact of prices as well as volume. The negative contribution of prices, volumes, and the joint venture loss to the operating income was partially offset by lower energy, raw materials, and by our continuous cost-saving efforts.

It is important to mention, though, that commodities market prices are seasonal, volatile, and subject to downcycles, and are expected to bounce back in given time periods, while most of our efficiencies and cost-savings measures are expected to linger through upcycles as well.

The next slide, slide 11, talks about specialty solutions division. On the other hand, this division, the specialty solutions, recorded an impressive growth this quarter, mainly supported by higher volumes sold in most of our specialty businesses. Such growth was slightly offset by lower prices, especially in advanced additives and in specialty fertilizers.

Moving to the profit side, you can see that price headwinds only partially offset the notable increase in operating income, which enjoyed a positive contribution from higher volumes, lower energy and raw materials, mostly in our industrial products business line, and efficiency measures in our bromine operation in Israel.

With that, I conclude my remarks, and let's open the call now for Q&A.

(Operator Instructions). Yonah Weisz, HSBC.

Hi there. Good afternoon, Stefan and Kobi.

Hi, Yonah.

I'd like to ask two questions, if I may, one on potash and one on bromine. For the potash side, and you can correct me if my calculations are wrong, but it seems like you have had extraordinarily high price and a fairly, fairly low cost per ton. So, some of your Canadian peers, for example, reported prices implying around selling -- implied selling prices around $200, $210 per ton on international markets, whereas you seem to be selling at $240 a ton.

At the same time, with a third less volume than the fourth quarter of 2015, you seem to have reached a cost equal to 2015 per ton on an EBIT basis. So, I'm wondering, first of all, could you tell me what led you to get this very, very high price? And can this premium or difference to the rest of the world or rest of your peers continue out into 2H 2016?

And also, a bit more on the cost side, is this fantastic cost base, even when you have low volumes -- excuse me, when you have low volumes, will that cost base continue on or even improve your volumes increase in 2H 2016?

All right. The answer is pretty simple. We have great marketing people and great production people. Therefore, we have better prices and lower cost.

The price effect is a mix effect. Really, we have an overproportionate quantity of sales in Europe, where we're selling in many cases a little bit more specialties, potash mixed with other products, PKs, NPKs. But, also, we're selling directly to farmers. So, we're getting higher net backs here. And because of the lower volumes, and usually, you see this mix effect.

On the cost side, this is mostly the effect of the ICL production network because sales and production are not the same. You know that, when we produce in Israel, we have the ability to store the produced volumes. Therefore, our production costs are not dependent on the sales quantities. So, when we have lower sales quantities like this quarter, we can still produce relatively full -- at full capacity in Israel. And that helps us to equalize the -- to still balance out the full fixed cost. And that's what happened here.

The Israeli asset, of course, is streamlined now since last year. You saw it in the last quarters, and you'll see it again. So, this I think shows that the cost that we have is sustainable. The lower cost is sustainable.

You also -- we also had good performance of our Spanish operations. So, we're a little bit lower in cost. This is not dramatic. But, it is still contributing a little bit. And also, the UK had a record production, preparing the exit there in one to two years. So, that also helped the fixed cost dilution. And polysulfate had a relatively good quarter or relatively good first half of the year. So, that also helps the fixed cost dilution. So, all of these things contribute. And if you add them all up, then you get this picture.

Kobi, some additions?

Yes, just to add two parameters in order to make sure that the comparison to -- potentially you're doing to peers is correct. We are also providing in our report the average sales price on FOB basis and not CIS. This I think will enable you to do maybe a better comparison to others. So, this is just one thing that I wanted to mention.

The other item relates to last year, the comparison to last year on the cost. Last year, we had a strike in the potash business for most of the quarter. And as a result of that, the cost due to the fixed expenses that were embedded in our cost structures contributed to relatively high cost per ton. And I just wanted to highlight this one as well when you are comparing to this quarter.

Bromine?

Okay. Thank you. Just before bromine, just one more question on cost is that, if your volumes, let's say, in second half increase with contracts signed, is there potential for costs to even fall even further, or is this kind of a stable plateau slightly below $200 per ton?

No, this is kind of the stable level because, as I explained, sales and production are decoupled because of this Dead Sea characteristic.

Okay. Super. And just a quick question on bromine, on clear brine fluid. I'm wondering if any of the slight stability which we're now seeing in the oil price and perhaps a bit more stability in terms of drilling activity has translated into any more volume, higher volume, and/or higher pricing for your clear brine fluids.

The biggest thing that we have been struggling with in the clear brine fluid business since already the fourth quarter of last year was the forecastability of this business because, the first time in 10 years, we didn't get a forecast from our customer. So, there is a relatively high level of uncertainty still in this business.

But, the oil prices at $50 or even a little bit higher that may be in the next one, two years, I expect it to slightly increase rather than decrease, are giving a little bit more confidence to our customers. We've received one forecast, a forecast from one of our customers that actually indicated there is stability. But, it's early now in the third quarter. So, I don't want to be too enthusiastic about it. It looks a little bit more stable than we would've seen it three or four months ago.

Thank you.

Next question, please.

(Operator Instructions). Matthew Korn, Barclays.

Hey, everyone. This is [Justin Wheelon] filling in for Matt.

Hi, Justin.

My question is on the China JV. And how much progress are you all seeing on your cost-cutting and efficiency programs that you've announced before? And is the transition to specialty moving as planned and on schedule? Thanks.

Okay. The cost cutting is going much better, but we're much more aggressive as well because of the pricing environment. You saw that we had a $15 million loss for the joint venture as whole in the second quarter that we booked. But, this is the 100% number. This is almost entirely occurred in April. So, May was a red zero. June was a black zero in this joint venture. We don't expect any more losses in the second half. So, the cost-cutting measures have actually helped quite nicely, also some optimization on the sales side there.

The move to specialties, of course, takes longer because it requires new facilities. Our Board of Directors yesterday has approved our -- the core investment that has to be done in this joint venture, the new white phosphoric acid plant. Our partner has already approved this as well. So, we will start construction here. And this takes the better part of two years until this comes online. And then we have the super-clean phosphoric acid that we can sell in China. Of course, we're not waiting with the transformation to specialties until this is done, but that will be the key tool in order to move a large portion of the portfolio.

We have in the beginning of the second quarter approved the construction of a water soluble specialty fertilizer plant and of a coating specialty fertilizer plant in China, which takes material from here and diverts into these specialties as well.

We've had very good success sales side in the industrial phosphate area. We are now the Chinese market leader in calcium phosphates for the toothpaste industry in China. We're very proud about it. It's not a massive market, but it's an indication that the new competence that we bring here on the production side for product quality, for customer service, for technical support, and for sales excellence is starting to work also in this market.

We have the opening of our food laboratory in Shanghai on Monday, in a week. So, this has been completed as well. This will also help. We have just increased the number of research projects in the R&D center that we have together with YPH. So, I'm quite pleased to see the momentum there. And bottom-line results will follow no doubt.

Joel Jackson, BMO Capital Markets.

Hi, good afternoon. So, a few questions. Stefan, could you now tell us the mine plan of the UK? What should we expect for MOP and polysulfate production in the second half of 2016? What should we expect in 2017? What was it before? And then can you also give us an update on how polysulfate prices, sales, and costs are going?

Yes, the UK second half of this year on MOP should be pretty much the same than the first half. We are, in light of the market environment, looking at whether we should change the exit of MOP from the UK even earlier than 2018, maybe already finish the production next year. This is under evaluation now. We will publish this in a few weeks from now. It's -- we're pretty close, but we're not quite ready.

Polysulfate is doing very well. We sold more than 100,000 tons in the first half of this year. This is doubling the quantities of last year. We expect to sell more than that in the second half of this year because then we have an acceleration and then again growth of 150,000 to 200,000 tons the year thereafter so that we reach 0.5 million tons by the end of 2017. Maybe we can do a little bit more here. It is a lot of moving pieces.

Average sales price of polysulfate now is still over $100 per ton. And this is FOB the UK. So, you have to add freight and until it gets to customers. But, if we measure it FOB, then I think this is the better guidance for you.

Okay. And so, I'm just confused, Stefan, by your language. So, if I read your press release verbatim, it says: The Company has decided to accelerate the transition from extracting and producing potash at the UK mine. But, you're saying second half-year volume will be the same, and you still haven't made a decision on whether you would actually accelerate the slowdown of potash production at the UK. So, can you just reconcile that, please?

So, the plan that we have to exit the UK would be that, in the middle of 2018, we end the production there. We have made a decision to accelerate. I just can't tell you whether it'll be June next year or end of next year or three-month acceleration or so.

So, if I interpret that, what you're saying is the acceleration right now will be -- you will stop producing potash at UK maybe 3 to 12 months earlier than the middle of 2018 you thought before. Does that sound right?

Yes, that's fair to say. And one of the major drivers for this is because this will support the buildup of the polysulfate franchise because it frees up capacity for polysulfate in a lot of the equipment that we would have needed otherwise. And of course, polysulfate has the priority here.

Okay. And then my last question would be, as we now have resegmentation, so we're trying to understand the businesses a little bit differently here. On the specialty solutions segment, can you give us some color on the seasonality of earnings and maybe relative margins percentages that business should experience sort of in a run rate year? Thanks.

Yes, usually, the second and the third quarter are stronger than the first and the second quarter. That has mostly to do with the end customer's demand, which is weak at the beginning of the year because the year is starting after the holidays, at least in most countries in the world. And it is usually weak in December because most customers are reducing inventory for their end-of-the-year accounts.

But, other than that, the whole division is less, much less seasonable than the essential minerals division. The specialty fertilizers, which make up about a quarter of this division, follow the ag cycle. So, same that you would expect in the essential minerals. The other businesses are much more stable over the year with this second and third quarter strength.

Thank you very much.

And margins are pretty comparable from one quarter to another. They don't vary so much.

Stephanie Bothwell, BofA Merrill Lynch.

Yes, thanks for taking my two questions. Firstly, Stefan, in your opening remarks on specialty fertilizers, you said it was tougher to sell the value-add products in your portfolio to farmers in the current commodity pricing environment, which should mean pricing pressure in some regions. Could you perhaps put a bit more color on that in terms of the products that you're referring to and also the geographies?

And my second question is on the balance sheet. Net debt was broadly flat sequentially versus Q1. You said earlier that higher volumes in the second half will be largely offset by the impact of lower pricing and that cash flow will be down in the third quarter.

It looks like you still have around 50% of your CapEx budget left to spend in the second half, which on my numbers means that deleveraging is probably going to be relatively limited this year and, if I assume flat pricing into 2017, probably relatively limited in 2017 as well.

Therefore, my question is, what additional levers do you have to pull on the CapEx budget or in terms of incremental cost savings to begin to reduce your leverage? Thanks.

Okay. Let me answer the specialty fertilizer question and then turn the balance sheet question over to Kobi. My comment on specialty fertilizer was much more general comment than to specific regions because you sell a specialty fertilizer, which is a complex nutrient granule, sometimes coated, sometimes it's water soluble products, at double, triple, quadruple the price than a commodity product.

And if you do this, the savings for the farmer are in the labor cost, in the energy cost, in the machinery, and in the yield. But, if the crop -- if the commodity prices of the -- if the price of the commodity fertilizers is lower, then obviously, that leverage is much more difficult to show. It's simply an agronomics calculation of the farmer. And this is what we see.

The second effect that we see, this is very specific to MAP, water soluble MAP, which was -- which is one of the single products in the specialty fertilizers. This specific product is under significant price pressure from China, in line with all the other commodities because the Chinese don't differentiate so much between water soluble products and other products. But, that's more of an exception than anything else. That's why I didn't put this in the foreground.

Balance sheet?

Yes, Stephanie, in terms of the debt and the balance sheet, I will start with the capital allocation principles that we are following very, very carefully. And we are trying to balance between three dimensions. The first dimension is to ensure the long-term sustainability of growth in the Company and the creations of the growth engines for the years to come. The second element is our debt structure or debt level. And the third element is to provide strong shareholder return via dividend and other measures to our shareholders.

This year, we are -- we will not experience a reduction in debt. We do plan to start to see a reduction in the debt level in 2017 coming from the fact that we are going to keep, as we said last quarter, the CapEx at the same level of 2016. And as a result of that, the growth in the Company that we're expecting to see in 2017 will serve the reduction of the debt. But, again, this is a 2017 thing.

And the other effect in 2017 is the further continuation of cost reduction that will just simply increase margins, all other things being equal. So, cost reduction lever is higher than CapEx reduction possibility, unless we want to compromise growth in the specialty businesses because all of our growth CapEx goes to specialty businesses, but we haven't made that decision.

Okay. Thanks. And perhaps just one follow up. Can you comment on the potential for further noncore asset disposals going forward?

Yes, we have one process underway. This is the process on our desalination business. I think we should get to a decision point in September I hope. It's a competitive process, but it's in the second round. So, there's only two players left in this round. We -- it's going well. So, that should end and should bring triple-digit million dollar proceeds. That, of course, is a source for debt reduction. This will all go into debt reduction when we make that. But, I cannot guarantee it because it's a process where we're only half -- where we can only influence the seller side, not the buyer side.

And do you quantify at all what the earning contribution of that business has been?

It's only visible in the financial results because it's not consolidated. It's not that dramatic, very small.

Okay. Thank you very much.

Rosemarie Morbelli, Gabelli & Co.

Thank you. Good morning, everyone, or good evening, wherever you are. Stefan, I was wondering if you could give us a little more detail on our FR122P flame retardant growing in terms of the interest in North America and Asia-Pacific. What do you see going on stream next year, for example?

Good potential. We are very happy with the takeoff. We get some interest from Asia-Pacific, but mostly from those players who are exporting into Europe. The US is not a market for this at the moment in time. It's very, very small. And so, the majority of this growth is in Europe.

So, when you say that you are seeing an interest in North America, so we eliminate I guess the US based on your comments. So, are you seeing more of an interest in Canada, or is that at this stage more wishful thinking than anything concrete?

It's so negligible, you don't want to think about this.

Okay. That's good. And could you talk about the long-term contracts that you are establishing? Are you -- are they based on volume? Do you have potential to adjust pricing, given the fact that price seems to be increasing steadily as you pointed out?

All of it. We have so many customers. We have every single model that you can imagine for this product.

So, how much do you think -- do you -- how much of your protection do you estimate you are going to have in the long-term contracts as opposed to selling in the spot market?

For FR122?

Yes.

This is very stable business. It doesn't -- actually not so relevant whether it's long-term contracts or short-term contracts because this is specified material by the customers to suppliers. It's relatively clear who supplies to whom. So, it's a very transparent market. So, the question isn't -- for the business isn't so relevant.

Okay. And then looking at clear brine fluids, you saw an increase in Asia-Pacific and South America. Can you give us a little -- a better feel for that? And if the Gulf Coast -- I'll get it right -- of the US is still weak, do you -- what is the percentage of your operations going into that particular region?

We don't publish which percentage we send -- we sell where in this business. But, as I said before, it's more stable than it was three or four months ago.

And lastly, if I may, on the electronic side, demand for printed circuitboard and automotive applications you said are flat. However, everyone else talks about applications for automotive growing. So, could you help me understand why you are not seeing that particular growing?

Yes, I think we are debating here about 3% growth. Is this considered flat, or growing? We would consider this flat. We've had actually good uptake in printed circuitboards for TVs in the second quarter. We think it has been an Olympics effect. And it will decline. Therefore, we're a little bit more careful on this business.

And actually, I do have one more question. You talked about the price of elemental bromine being up 30% versus the third quarter of 2014. What is it versus the third quarter of 2015 and sequentially versus the first quarter of this year?

It's flat.

Okay. Thank you.

You're welcome.

(Operator Instructions). Howard Flinker, Flinker & Co.

Hello, everybody. I think I understood the opposite of what you said about prices. Did you say that prices for you include cost insurance and freight, and therefore, that's why the apparent price is higher, or did you say the opposite?

Are you talking about potash?

Yes.

Yes, so, the prices that we book as sales include the freight. And this is why we provide also the FOB average price for the quarter in a separate table so that you will be able to make the difference.

I understood the opposite. Okay. Thank you.

(Operator Instructions).

Great. I'm very happy to see that the quarter was so clear that we have relatively fewer questions this time. Thank you very much, ladies and gentlemen, to listen, for dialing in. Enjoy your day. And I'll see you on roadshow or in latest three months from now. Bye, bye.

Thank you very much. So, ladies and gentlemen, that does conclude our conference for today. Thank you, all, for participating. And you may now disconnect.