ICL Group Ltd (ICL) 2022 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the ICL analyst conference call. (Operator Instructions) I'd like to hand the call over to our first speaker today, Peggy Reilly Tharp, Vice President of Global Investor Relations. Please go ahead.

Thank you. Hello, everyone. I'm Peggy Reilly Tharp, Vice President of Global Investor Relations. I'd like to welcome you and thank you for joining us today for our quarterly earnings call. The event is being webcast live on our website at icl-group.com.

Earlier today, we filed our reports with the securities authorities and the stock exchanges in the U.S. and in Israel. Those reports as well as the press release are available on our website. There will be a replay of the webcast available after the meeting and a transcript will be available shortly thereafter. The presentation, which will be reviewed today, was also filed with the securities authorities and is available on our website. Please be sure to review the disclaimer on Slide 2.

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. The company undertakes no obligation to update any financial information discussed on this call at any time.

We will begin with a presentation by our CEO, Mr. Raviv Zoller, followed by Mr. Aviram Lahav, our CFO. Following the presentation, we will open the line for the Q&A session.

Raviv, please.

Thanks, Peggy, and welcome, everyone. In the third quarter, we once again saw a benefit from our strategic focus on our differentiated long-term specialty solutions, which was in addition to upside from commodity prices. We delivered record third quarter results on a consolidated basis for sales, operating income and EBITDA, as did all 3 of our specialties businesses. This quarter's strong performance reinforces our recent Investor Day message, as it reflects the significant contribution from our specialties businesses, which are expected to help us deliver long-term sustainable shareholder value. While we expect the road to get a big rougher in the future, we know we have the right fundamentals in place to build on our strong momentum and to leverage the significant opportunities ahead of us.

On Slide 3, you can see an overview of the quarter, which includes the records I just mentioned and also highlights one more as our Dead Sea operations achieved production records for the third quarter and on a year-to-date basis. In addition, we've had a record year-to-date operating cash flow totaling $1.6 billion, and our focus on long-term cash generation resulted in a very strong quarterly free cash flow of $429 million, which was up nearly 200%.

Our year-to-date adjusted net income was a record $1.9 billion, and our adjusted earnings per share for the quarter of $0.49 was up nearly 200% year-over-year, resulting in record year-to-date EPS of $1.55. We continue to return value to our shareholders through our policy to pay out 50% of annual adjusted net income, which resulted in a third quarter dividend of approximately $0.24 per share. In total, ICL will pay out $314 million dividend for the quarter.

Now please turn to Slide 4, where you can see once again significant year-over-year improvement. Sales of $2.5 billion were up more than 40%, while adjusted EBITDA of $1 billion was up nearly 140%. EBITDA margin for the quarter increased to approximately 42%, up from approximately 24% in the third quarter of last year. We also generated more than $600 million of operating cash flow during the third quarter of 2022. There is an overview of our third quarter results on Slide 5, which really speaks for itself, and Aviram will discuss in more detail later in the call.

I'd now like to begin our second review with industrial products on Slide 6. Record third quarter sales were $437 million and up 13%, while record third quarter EBITDA of $170 million was up 40% year-over-year. We continued to achieve margin expansion as EBITDA margin improved to 39% from 31% in the third quarter of last year. This business continued to benefit from its strategic focus on value over volume, especially as end market demand remained mixed. As a reminder, our bromine and phosphorous-based solution is going to almost everything from computers, appliances and cell phones to automotives, textiles and pharmaceuticals. Our products also represent key components in installation for homes and offices and are used as solutions for the oil and gas industry. It's difficult to find an end market where we don't make up a piece of the final puzzle and this helps diversify our overall explosion.

During the quarter, we saw some softness from consumer electronics, as we have discussed on our previous call and from the construction industry as well, as interest rates have continued to rise. We expect both of these markets to continue to moderate in the fourth quarter.

Conversely, the oil and gas and specialty minerals end markets are expected to stay healthy in the fourth quarter. Clear brine fluids remain in demand, especially in the Middle East, which is a region that has become more significant for us following the signing of the Abraham accords.

In the U.S., there is expected to be strong demand for magnesium chloride for de-icing as inventories there are low and winters approaching. Overall, our Industrial Products business saw higher prices, which helped offset higher raw material costs. While bromine prices in China have declined from the peaks we saw at the end of last year and the higher prices we saw in the first half of this year, third quarter prices were relatively in line with the third quarter of last year and have risen somewhat in recent weeks.

Turning to Slide 7 in our potash business, where sales of $854 million were up more than 100% year-over-year. EBITDA of $537 million was up nearly 350% and EBITDA margin of 63% was up significantly over the 30% margin we reported in the third quarter of last year. As I just mentioned, our operations in the Dead Sea delivered record production for both the third quarter and the first 9 months of the year. And as expected, our average potash price in the third quarter moderated from the second quarter.

However, average potash realized price per ton, came at $652 or nearly $700 CIF, which was up $335 year-over-year. During the third quarter, we signed a long-term potash agreement with a customer in Europe to supply 300,000 metric tons annually. We're also shifting our metal magnesium business to long-term supply agreements, and we already have approximately 50% of our production under contract for the years 2023 and 2024. This business delivered record third quarter and year-to-date profits as it enjoyed both higher prices and increased production. We have firmly established our position as a global partner of choice for metal Magnesium as our customers for this business have been looking for reliable and consistent supply, something we strive to leverage across all of ICL.

Turning to Slide 8 in our Phosphate Solutions division, where third quarter sales of $766 million were up nearly 30% year-over-year, while EBITDA of $239 million was up 70%. Once again, this business saw record quarterly results for both commodities and specialties. We continue to maintain our strategic long-term focus on driving specialty sales and profitability and are shifting to more long-term supply agreements. For the third quarter, specialties made up nearly 60% of sales and more than 45% of EBITDA.

Overall, significant EBITDA margin expansion was achieved, improving to 31% from 24% in the third quarter of last year as phosphate specialties margin increased from 15% to 24%.

For the quarter, higher prices helped offset significant increases in raw materials. Food Solutions had a record quarter as we saw both higher prices and strong demand across all regions. Phosphate specialties for industrial applications were mixed by region with lower demand in the EU and China, while paints and coatings did very well in the U.S. The big news for Phosphate Specialties came after the quarter ended.

In late October, we were awarded $197 million by the U.S. Department of Energy to invest in our efforts to develop a sustainable supply chain for energy storage solutions. In total, we're building a $400 million plant in St. Louis, where we will produce high-quality lithium iron phosphate material for the energy storage industry. This plant is expected to be operational by 2024 and to have 2 production lines with each capable of producing 15,000 metric tons of LFP material per year. This represents a significant expansion of our energy storage portfolio and demonstrates our commitment to being a key participant in the electric vehicle and energy storage solution markets.

We made our first entry into these markets in China through our YPH joint venture. While this business was somewhat challenged during the quarter due to a planned overhaul and unexpected export limitations, demand for our food solutions and LFP battery materials remain strong.

Turning to Slide 9 and growing Solutions, formerly known as Innovative Ag Solutions. This new name reflects how this business has changed over the past few years and how we expect it to continue to expand and grow. It better represents our growing portfolio of solutions and the fact that our business encompasses many different specialty categories as well as services. Our new identity also pairs us with our ultimate customers, the farmers who use our specialty products.

Growing Solutions delivered a record third quarter with sales of $629 million, up 25% over the prior year and EBITDA of $127 million, which was up 90%. EBITDA margin expanded to 20%, an improvement of over 13% rate in the third quarter of last year. This record quarter also demonstrates the strong performance of our Brazilian acquisitions. We're very pleased with the seamless integration we have seen over the past 2 years and are looking forward to driving additional synergies as we continue to expand our product offerings, both to and from this region.

Third quarter results also reflect a record-setting quarter for our FertilizerpluS products, which are based on our organic polysulphate. ICL Boulby set new daily production records and has exceeded its 2021 production quantities. This site remains on track to achieve its 1-million-ton target in 2022.

Our turf and ornamental results were slightly ahead of last year with both businesses showing positive improvement in most regions. And like all of growing solutions, this business had to contend with both higher cost and lower availability of raw materials in the quarter. However, we have been able to offset these increases of cross growing solutions with premium pricing. During the quarter, we also made some announcements in the area of new products, R&D and for our digital Ag offerings.

Our investment in Lavie Bio, a leading ad biologicals company focused on microbium based products addresses all 3 of these aspects. Lavi Bio's unique approach leverages big data and advanced artificial intelligence and our collaboration with them focuses on developing novel biostimulant products to enrich fertilizer efficiency. Combining Lavie Bio's Ag biological experience and cutting-edge technology with our advanced knowledge of fertilizer use and farmers' needs, will help facilitate the development of new and innovative products for the agriculture industry.

Now if you will turn to Slide 10, I would like to update you on additional progress we've made in the areas of sustainability, innovation and leadership. For sustainability, we were once again cited for our human resources efforts. In Israel, we were included in the Economy Ministry's Diversity and Inclusion Index. And in Brazil, we were recognized by the -- Great Place to Work global consultancy. While it is always a pleasure to be acknowledged for our efforts, it is especially gratifying when it comes to our own employees.

During the quarter, we also became an early adopter of the United Nations Global Contact Communication on progress. We are pleased to show our commitment to the U.S. ten principles and sustainable development goals and to be able to receive insights to help us identify any gaps in our sustainability efforts and improve our performance. We also once again improved our Sustainalytics and MSCI scores.

Finally, just this week, we formally launched Nutrivant, a food-grade magnesia product, which replaces the toxic fungicides currently used to protect citrus fruits from decay. This product will help with post-harvest citrus preservation in a natural and safe manner. Nutrivant is also an innovative solution and enjoyed several other products we have recently developed. This includes our exciting Eqo.x product, which is a groundbreaking rapidly biodegradable release technology designed for open field agriculture. It not only increases nutrient use efficiency; it also allows for similar or increased yields with reduced fertilizer rates. Eqo.x is the first offering of its kind in the market to provide a control release fertilizer, which biodegrades rapidly and was specifically designed to meet future European fertilizer standards set to go into effect in 2026.

This product joins ‘Keep Green’, our first biofertilizer, which was developed in Brazil. Keep Green provides protection for coffee tree leaves against excessive solar radiation and its use has been shown to result in a 9% increase in coffee tree productivity. Also in Brazil, we recently received accreditation for a second research institute from the Ministry of Agriculture. This accreditation is unique as it is exclusively in the area of plant nutrition and allows us to expand our innovation efforts for new fertilizers and for the production of biofertilizers, among others. We are pleased to be working with the ministry to promote sustainable development and competitiveness of agribusiness for the benefit of the Brazilian society.

We also announced several digital innovations over the past few months, including ICLeaf. This revolutionary diagnostic tool rapidly provides farmers with a personal prescription for maximizing yields and allows them to make quick and data-driven decisions with immediate and season improvements. Our Itomatics digital start-up partnered with the consortium for Precision Prop Nutrition to launch a unique global platform designed to drive international research collaboration and expand open access to crop nutrient data to farmers, their advisers and global policy makers.

This platform serves as a critical open data resource for agricultural researchers and professionals who conduct field trials on soil fertility and crop nutrition and will enable users to both contribute to and benefit from the data sets.

As we discussed during our Investor Day, we continue to focus on strengthening our leadership position across our specialties businesses. Foremost was our expansion into the energy storage solution supply chain in the U.S., which I already discussed. However, this opportunity goes beyond our expansion in St. Louis to include one of the most significant innovations we're working on, the development of solid-state electrolytes based on bromine. We've already partnered with some of the world's leading technology companies and research institutions to try to bring this vision to fruition. In the meantime, we see new potential on liquid electrolytes, which are currently produced in China and based on phosphorus.

As Europe and the U.S. are looking to expand their supply chains in this area, we have been presented with a unique opportunity as a leader in phosphorus-based specialty solutions in both regions. We have production capacity available in Europe and are building additional capacity in the United States in order to produce PCL-3 and PCL-5 for LIPF6 electrolytes. We believe we are well positioned to become a leader in this space as we have the know-how, the capacity and the capability to develop the solution necessary. This puts us in a unique position where we have the potential to be a significant part of the liquid electrolytes market in Europe and the U.S. at the same time and also work as a disruptor in the area of solid-state electrolytes. So in the short and midterm, we're working on liquid electrolytes and raw materials for batteries and in the long term on electrolytes based on bromine solutions.

In China, we inaugurated our new water soluble NPK plant, which was completed in August after only 8 months. The plant was designed to produce 30,000 tons of saluble fertilizers annually, of which approximately 5,000 tons of liquid fertilizers, representing a new product for our YPH joint venture. During the quarter, we gathered our employees together to celebrate the 100th anniversary of ICL.

The story of our humble beginnings is a remarkable one, with more chapters yet to be written. That would include the story of what ICL will look like as a company 5 years from now. And this brings us to Slide 11 in a summary of our recent Investor Day and an overview of our updated 5-year plan, which we believe puts us firmly on track to become a global leader across all 3 of our specialty businesses.

Towards 2027, we're targeting sustainable double-digit growth and continuous margin expansion. As you know, we executed on our 2020 plan and delivered results much sooner than expected and with strong momentum. We plan to use this momentum to leverage the significant opportunities we see arising from the global sustainability challenges, which impact each and every one of us. We have the right fundamentals in place and are well positioned to achieve our growth and margin expansion plans.

Finally, I would like to draw your attention once again this quarter to Slide 12. We remain focused on the future and are committed to growing our specialties impact to the next level. I recognize it can become repetitive to say the same things each quarter, but there are 3 areas I would like to reinforce.

First, we will continue to focus on the future and our long-term specialty strategy, as this allows ICL to strengthen its leadership position in comparison to 2 more commodity-based peers. Second, our performance in the quarter once again reaffirms our specialty strategy, and we expect to leverage our strong balance sheet to focus on the right business expansion opportunities. Finally, as we have past the peak of the current commodity cycle, we now more than ever need to continue to keep our eye on the ball and remain focused on the future of long-term cash generation and value creation to our shareholders.

Now as always, I want to thank the entire ICL family of employees all around the world for their hard work and contributions as we delivered record results once again. On a very sad note, the day after our last earnings call, the ICL family lost 2 members when Anat Tal and Nitzan Moshe died in a tragic car accident in Southern Israel. Anat Tal was President of the Industrial Products Division; and Nitzan Moshe was our EVP of Operations. -- beyond their invaluable contribution to the company, Anat and Nitzan were first and foremost, our friends, and were always there to help and support us, managers and employees alike. They contributed significantly to building our strong foundations and will be sorely missed, forever a part of ICL family, may they rest in peace. I would now like to turn the call over to Aviram.

Thank you, Raviv, and to all of you for joining us today. While you have already seen Slide 14, I would like to call out a few additional highlights. First quarter adjusted operating income of $928 million was up nearly 200% and adjusted operating margin of 36.8% was up dramatically from 17.6% in the third quarter of last year. For the quarter, adjusted net income of $628 million was up more than 180% year-over-year.

If you will turn to Slide 15, you will see an overview of the macro trends impacting ICL, our peers, suppliers and customers. Trends continue to evolve, and general uncertainty persists. Inflation remains high due in part to soaring energy prices globally. The cost of living is high overall, and this includes food prices. Global forecasts are being slashed for 2023 with slower growth expected into 2024. Governments and central banks around the world are reacting to inflation, which is leading to rising interest rates. Many currencies are seeing a significant disparity versus the U.S. dollar, which has for now maintained the position of strength.

Supply chain disruptions remain an issue for ICL and our customers. We have continued to leverage our advantageous production locations and global supply chain capabilities, which have enabled us to provide our customers with consistent and reliable supplies and to extend our relationships through long-term contracts. In the regions and end markets where we do business, we are seeing divergent trends. However, one factor remains in common, a continuation of geopolitical tensions.

Despite this persistent theme, we have seen some moderation in commodity prices down from the peaks we saw in the second quarter of this year, and these trends are shown on Slide 16. Prices for potash are still elevated year-over-year but have declined quarter-over-quarter. Phosphoric acid prices were stable from the second quarter to the third, while freight rates continued their downward trend and are now in line with the first quarter of 2021. The biggest gap is for sulfur, which also declined to first quarter 2021 rates but with a much more rapid and pronounced downward trajectory.

While we were still able to offset high prices of raw materials in the third quarter, you can expect we will see some pressure in the fourth quarter as we work through some higher-priced inventory, especially for sulfur.

Turning to Slide 17, where you can see crop prices remain high, reflecting the ongoing situation in Ukraine and decades low grain stocks, farmer affordability also remains high, but uncertainty around higher input cost and availability, combined with rising interest rates is weighing on overall sentiment.

During the third quarter, we saw fertilizer prices begin to decline from second quarter peak. -- which followed the Russian evasion of Ukraine, it appears that approximately 80% of Russia's annual potash production should make it to market this year. And while it is taking a bit longer than it used to, it looks like roughly 40% of Belarus product we find a home this year. This means a good portion of the global water supply is still not getting to market, resulting in reduced fertilizer consumption, which raises the risk for significantly lower crop yields. This potential, combined with very low grain stocks increases the risk for a global food crisis. Unfortunately, this outcome will impact the poorest among us scenario, no one wants. In addition to higher prices for food, consumers and businesses are being impacted by higher energy prices -- these increases have interrupted some industrial operations in Europe and other regions, while the situation in Europe might not be as dire as initially projected, markets remain mild in uncertainty going into the winter and next year.

On the left side of Slide 18, you can see an improvement in sales coming from all 4 of our segments. On the right side of the slide, you can see the impact of higher prices on our year-over-year sales. For quantities, we saw a decline as we continue to focus on value over volume for our specialties businesses. We have actively worked will expand our long-term agreements and maintain our premium positioning while offering consistent and reliable supply to our global customers. One example of this strategy at work is apparent in our Phosphate Solutions business. Once again, we maintain our focus on specialty sales, which represented 59% of total phosphate solutions sales in the third quarter.

Turning to Slide 19, higher prices also made a significant contribution to adjusted EBITDA, and once again, on a segment basis, all 4 of our businesses contributed to the year-over-year improvement with significant margin expansion and cash generation across the board. For phosphate solutions, Phosphate Specialties comprised 46% of the EBITDA for this segment.

I would now like to review a few highlights on Slide 20. For the third quarter, our net debt-to-EBITDA ratio improved to 0.5 from 2x in the third quarter of last year. As Raviv mentioned, we saw substantial improvement in both operating and free cash flow. We also continued to deliver sustainable shareholder value. And for the third quarter, our annual dividend yield was 9.2% at the high end of our pre-group.

One final note, our effective tax rate for the third quarter was 30%. And as we mentioned last quarter, following our settlement with these ready tax authorities, we expect our annual tax rate to be in the 30% range.

Turning to Slide 21, I would like to call your attention to our 2022 guidance as we now expect our results to be at the upper end of our previous ranges, which called for adjusted EBITDA of between $3,800 million and $4,000 million in total and for specialty business to contribute approximately $1,500 million to $1,600 million of that amount. And with that, operator, we can begin the Q&A... Thank you.

Thank you. (Operator Instructions). Our first question today will come from the line of Joel Jackson from BMO Capital. Joe, do you hear me? Yes. Go ahead.

Great. I have a few questions. I'll try to ask some one by one, first question multiple parts. In the Potash segment, can you just talk about where you see potash prices, your realized potash price shaping up in Q4? What's your comment on potash inventories around the world, including Brazil. Yourself, you've been building inventory in potash now for a couple of quarters. Would you expect, you would also build potash inventory across Q4 at the ICL level?

First on potash prices, we see in the U.S. that the market is leveling out, and it seems that healthy demand is emerging now with price being about $600 currently. We see in Brazil that destocking has happened and the stock levels are returning to close to normal. There's still not abundant demand, but we see shipping lines gone down from 11 to 12 weeks to 1 to 2 weeks, and we see things normalizing there, again, around the same price level. Currently, Brazil and the U.S. are the lowest price destinations for potash.

And as we know around the world, things tend to level out over time. All in all, the deliveries this year are going to go down by about 8 million to 9 million tons relative to last year, that we expect next year that they'll go up by about 5% relative to this year. In terms of -- so I talked about price and inventory, we are not growing our inventory levels in ICL. It's relatively marginal. If we end up a quarter with operating levels of potash stocks. So it's a transitional thing. We're not building up inventory. We're -- as you know, we're a price taker. So we place our product where the best opportunity is. The best opportunity in the first half of the year was Brazil. So we placed about 90% of our annual allocation in Brazil in the first half of the year. So we continue to be opportunistic, and we'll sell where the price opportunity is the best. We don't intend to...

(Break)

No one ever talks about in the last couple of years when I was kind of a loss leader, but now it's going to be a little kicker. Looking into '23 and your different contracts, do you have an idea of what might need to earnings you might be into '23 versus '22 versus comicycle? (technical difficulty)

Right now, we've contracted about 50% of quantities for 2023 and 2024. It's a little more than 50%. It's around 60% for 2023, and it's less than 50% for 2024. Those 60% at a higher average price than this year. Magnesium business in the first 9 months of the year has made a $56 million operating income. It used to -- I mean, the year before, it made a loss of over $30 million...

Okay. That's really helpful. I think that's my question.

Our next call will come from the line of Alexander Jones from Bank of America. Please go ahead.

I have two questions, if I may, maybe around the LFP investment. I guess the first question is that you're already making raw materials for LFP cathodes in China. Can you give us some details on the profitability and returns of your activities, specifically in LFP in China? And then the second question is sort of translating that to the U.S., I suppose the difference at the moment in the U.S. as you don't have captive source of raw material domestically. Do you see a risk that some of the domestic U.S. phosphate players move into this space? And what barriers to entry do you see to protect your return in that scenario?

It's a very good question. I'll start from the basics. Our profitability in China is around 20% in this business. Looking forward, the opportunity is higher because we're leveraging the situation now that new supply chains are being built. And we're going further downstream, getting close to the customer and getting more value on our side. We have the right partnerships lined up both on the raw material side and on the customer side. So it's a closed-loop operation, we can go into it. (technical difficulty)

We know the input and the output and that takes into account the plans of some of our competitors. Ultimately, some of our competitors are going to go into this business because it's a relatively huge business, and it increases significantly. Everything that's based on White phosphoric acid. So our competitors are also going to get into this business. We have not only a first Miller's advantage, but we're also at the next level, we're downstream. So it wouldn't be a surprise if we partner with one or more of our suppliers. Today also for our current specialties phosphate business, a huge chunk of our product comes from Nutrient.

Just to add for China, it's China for China. Yes, in... It's not export. It's two local battery manufacturers. two manufacturers actually.

Just a follow-up on your comment where brand can be coming from Nutrient. Are you able to give us a split for the Specialty Phosphate business and what share of your raw material is internal versus externally sourced?

The internal -- the overall internal is about 55%. But in North America, it's much less than that. Over 50% of our supply in North America is based on third party and a huge chunk of that is nutrient. Thank you.

Our next call comes from the line of Ben Theurer from Barclays. Please go ahead.

Good afternoon. You can hear me? Perfect. I wanted to follow up a little bit on the outlook you've presented and the challenges to overcome and the price environment. And obviously, with -- in light of what you're talking about some of the long-term contracts you're targeting for with your customers. Can you talk us through how you think about 2023, maybe early stages, just given what we're seeing on the crop economics being very favorable. But then at the same time, we're seeing some of the prices coming down. So how flexible or what does that mean for some of your long-term contracts and relationships with your customers?

Okay. It’s Aviram. You asked, I think, quite a wide question. The answer to that is I have to go by the different markets. So I think in the agricultural world, it's one picture going into '23. And again, in agriculture, -- so I think there will be quite some differences between, let's say, our bio-stimulant side to the (technical difficulty) side to all sorts of things that make up that culture. And the other markets, it's a different story. Now the way we look at it is the following.

First of all, when we look at 2023 for now, generally speaking, the issues that hunt or back the world in late 2022 don't seem to find a solution. It can be the, I would say, the stick inflation, the energy prices, the geopolitical issues, going all the way to currencies, I think the macro side would suggest that for now, for lack of more clarity or any change in direction, it will be similar to what is with us in, let's say, the second half of '22. What can be different, and again, going by the market is, I think, generally, the world is learning to cope with the new reality. It was a novelty in the first half of 2022, leading to a lot of, I would say, exaggerations on multi things and later on came second half in a way, which if you look at it as some correction to the first half, 2023 should be at least analytically less volatile.

Going by markets on the agricultural side, -- there were some things that were not done in 2022 and will have to be done in '23. We'll have to wait and see how the yields behave. Generally speaking, there is a belief that they will be impacted, which means that quantity wise, there will be some return to higher quantities. The price should be, I think, Raviv answered this to previously to linger around, let's say, the 600 to potash now, which means that if commodities are high, the agriculture commodities and potash is more affordable, usage should be higher.

I think this is the general opinion of the big companies that make up the space. When you look at the -- and this is the agriculture side. When you look at the industrial product side, again, as we reported now, there are some areas which are doing extremely well and some still are impacted by high interest rates and/or lower demand. I think that for the electronics side, it is destined to continue for quite some time. For the building side, again, high interest rates will lead to a tapering there. So I don't think there will be much change on that front.

Moving over to the phosphate specialty side. I think we have a very good story and this continues. And most things that we do, I would say, apart from things that have to do with the more, let's say, novel part the proteins, et cetera, which it seems that in this environment, the appetite of our big customers to go into new things will be somewhat diminished. And you put it all together, I can go basically on and on.

We are seeing a year 2023 as a solid year. However, with not as explosive as the beginning of this year and with less hopefully, volatility next year. That, of course, can change by -- very quickly with the external factors, especially the geopolitics one affecting us.

On China, by the way, one last thing, the restrictions that are being imposed from what I basically read. Generally, there's nothing to suggest that this will be sort of relaxed next year. So I hope I did it through the reason of the things that we believe are there.

Maybe to sum it up by minerals, I think that on potash and phosphate, we expect markets to continue to be tight next year with basically the Belarusian product missing on potash and some of the Chinese product missed on phosphate. On the bromine side of things, since we're a significant as we're a market leader, we don't expect a significant fluctuation of prices on the renewals of contracts next year.

Perfect. And then just one last one, and I mean clearly, it's a strong year and you showed this on the cash flow side and the specialty business being growing a lot. Do you still consider and would you think of looking into opportunities maybe to accelerate the growth by focusing maybe some M&A capital into the specialty business, just taking advantage of the commodity environment, good cash flow, and we've seen it in the quarter to just reinvest that maybe into growing pieces within specialty. Is that something on the table for next year? You think there are some opportunities?

Of course, Ben. There's a growing amount of opportunities given 2 things that are happening. One is the very high level of liquidity, even though we already returned $1 billion to shareholders this year. We have growing liquidity and strengthening of the balance sheet. And at the same time, -- the world is going a little nuts and opportunities are coming by the day. So that doesn't mean that we're going to buy everything that comes by. But we want to be very focused and go through the right accretive acquisition, just like we did when we took advantage of an opportunity during COVID and acquired 2 excellent Brazilian companies that have become a significant part of our growing solutions G&A. And we want to -- that made us even -- that made us our appetite even bigger, and we definitely are looking at M&A, and it's -- hopefully, it's in the cards.

And maybe, Ben, just to add that -- if you think about this, analytically, what's going on, the story of the very much tightening of the capabilities and the abilities in the financial side is I'm not sure it is yet well understood by a lot of bodies that tend to think that times are as in the past. As time passes, and that's why, for us, it's critical because we have a very strong balance sheet, with a very, very focused strategy. It analytically, it would seem that there will be more opportunities in the near future rather than less because I think still multiples things people are not exactly realistic on valuation. And I think this is coming -- is going to be more and more clear in the coming periods. Thank you.

As a reminder, if you wish to ask a question, please raise your hand using your mobile or desktop application or press star. Our next question today will come from the line of Mubasher Chaudhry from Citi. Please go ahead.

The first one is on the potash side of things. Can you please talk about the Indian and the Chinese potash contracts? I assume you've been part of the discussions. Just interested in what level those contract prices are coming in that and what level we should be expecting for 2023?

The second question is on the third quarter volume decline, third quarter of volume declines in quantities, I think it's from 1Q to 3Q, it's had volume declines every quarter. Just wanted to check up on the outlook here, both from an ICL's own production side of things and then how demand has progressed in as we head into the fourth quarter and then 2023.

Okay. So with the contract prices... (technical difficulty) There's been initial in these discussions. So I have a limited amount of information. I don't think that there's been significant exchanges regarding pricing yet. But the schedule seems to be clear to everybody that shaping into first quarter contracts. The Indian situation is a little -- is a little more urgent, meaning that India doesn't have the required inventory that is needed for the next season. So that may accelerate things somewhat. There have been situations like last year when India signed contracts before China and also got a better price to an extent.

So that may happen. If not, if it's a Chinese contract first, then we're looking at around New Year of -- around the Chinese New Year. And if it's an India-led contract, it will be beforehand. That was on potash contract. Regarding quantities. So first of all, potash quantities went up and so did phosphate quantities, phosphate specialty quantities went up significantly in the quarter. Where we see the lowering of quantities, there are 2 places that I would call out. One is around bromine compounds where, first of all, our view of the world is value over volume. And second, we're in annual contracts where when there's a significant over demand in the first parts of the year, then there is less quantities left for the back side of the year. And also seasonally fourth quarter -- third quarter and fourth quarter are weaker (technical difficulty) with expected fourth quarter expected to be even less than third quarter. But it's perfectly normal cycle, again, value over volume.

In phosphates, the quantity decline this quarter has to do with the situation in our joint venture, YPH because of an overhaul of 2 weeks and also export restrictions, which caused us to accumulate inventory, but that's temporary. I can tell you that we worked through the export limitations and it looks totally different in October. So overall, if you look at the 9 months, over the 9 months, we've had a significant increase in volumes in specialty phosphates. And we haven't accumulated any phosphate commodity inventory. In potash, again, totally transitional, if there's a little bit of operational inventory. And in bromine compounds, like I said, it's value over volume.

So overall, we see quantities increasing in all of our businesses. In growing solutions, we've said in the past that part of our results improvement as that we're selling less third-party products. So we're selling more of our own products and less third-party products. And the result is that you can't really see the quantity increase, the quantity is increasing. So it's increasing in 3 of our 4 businesses, the only place where there's no increase in -- the only place where there's no increase in quantities this year is in bromine compounds in our Industrial Products division, again, value over volume.

That's very helpful. Just to come back on the potash contracts. Is there any kind of expectation on your side for what the pricing could be coming out of that? I mean I've seen headlines talking about the contract prices starting with a 4 yes.

I don't think it would be prudent, but of course, we don't even think of anything that starts with the 4. We don't have that in our mind process. Thank you.

That concludes our question-and-answer session for today. Please proceed.

All right. Thanks all for joining us. We appreciate your attention and look forward to putting back to you next quarter. Thank you very much. Have a great day. Thank you.