Executive Summary / Key Takeaways

• ICL Group is strategically transforming into a specialties-driven powerhouse, with these segments contributing 70% of 2024 EBITDA, leveraging unique resource access and advanced technologies to differentiate from commodity-focused peers.
• The company delivered a solid Q2 2025, with sales up 5% year-over-year to $1.832 billion and specialties-driven sales growing 8% to $1.496 billion, demonstrating consistent execution despite global uncertainties.
• ICL's innovative technological advancements in sustainable flame retardants, battery materials, and ag biologicals are creating new market opportunities and strengthening its competitive moat, particularly in high-growth sectors.
• While geopolitical challenges in Israel have led to a revised 2025 potash sales volume guidance (4.3M-4.5M metric tons), the company anticipates higher potash prices in Q3 2025 due to new contracts and improving spot rates, bolstering profitability in the segment.
• A strong balance sheet, with $1.5 billion in available resources and a net debt to adjusted EBITDA of 1.5x, supports ICL's disciplined capital allocation and ongoing M&A strategy, underpinning long-term growth.

A Foundation of Minerals, A Future in Specialties

ICL Group Ltd., originally incorporated in 1968 as Israel Chemicals Ltd., has strategically evolved into a global specialty minerals and chemicals company, officially rebranding in May 2020 to reflect its diversified focus. The company operates across four core segments: Industrial Products, Potash, Phosphate Solutions, and Growing Solutions. This structure underpins a deliberate shift towards a specialties-driven business model, which by 2024, accounted for a significant 70% of its annual EBITDA. This strategic pivot aims to differentiate ICL from more commodity-focused peers by providing high-value, customized solutions across diverse industries, including pharmaceutical, food, oil and gas, building and construction, electronics, automotive, and battery production.

ICL's foundational strength lies in its access to unique natural resources, particularly the Dead Sea, which serves as a highly cost-competitive and efficient source for bromine and potash. This resource advantage provides a critical competitive moat, enabling ICL to maintain cost leadership in key commodity segments while simultaneously developing advanced, value-added products. The company's overarching strategy, maintained even through a recent leadership transition, centers on driving growth in its Specialty businesses, maximizing potash sales by prioritizing the most profitable markets, and relentlessly pursuing cost savings, operational enhancements, and complementary mergers and acquisitions.

Technological Edge: Driving Innovation and Market Penetration

ICL's commitment to technological differentiation and innovation is a cornerstone of its investment thesis, enabling it to carve out niche markets and enhance profitability. In its Industrial Products segment, the company has developed sustainable phosphorus-based flame retardants that are gaining traction, particularly in Europe and the U.S.. These advanced products offer a critical advantage by meeting stringent sustainability requirements, positioning them to replace older, less environmentally friendly Chinese products that have faced anti-dumping measures. This directly translates to improved sales and volumes, as evidenced by the segment's performance in Q2 2025. The Dead Sea's role as the most cost-competitive source of bromine, accounting for approximately two-thirds of global supply capacity, further solidifies ICL's leadership in the global bromine market.

The Phosphate Solutions segment is at the forefront of ICL's foray into high-growth battery materials. The YPH joint venture in China has been instrumental in producing battery-grade phosphate, demonstrating strong demand and achieving record production of MAP (Monoammonium Phosphate) in Q2 2025. In North America, ICL's Battery Materials Innovation and Qualification Center in St. Louis became operational in less than a year, a significant operational achievement that allows the company to prove its products at scale and strengthen customer relationships. Furthermore, a strategic agreement signed in January 2025 with Dynanonic, a leading global player in capital material capacity, to produce lithium iron phosphate (LFP) at ICL's Sallent site in Spain, underscores the company's commitment to developing high-quality solutions for sustainable supply chains in the Western Hemisphere. These initiatives are strategically aligned to capture demand in both stationary energy storage (a primary opportunity in the U.S.) and electric vehicle (EV) markets.

Within the Growing Solutions division, innovation is focused on sustainable agriculture. The acquisition of Lavie Bio, a leading ag biological technology company, in April 2025, and its full integration by Q2 2025, positions ICL as a global powerhouse in ag biologicals. The launch of Bioz, a new range of biostimulants in Europe, engineered to improve crop establishment, growth, and resilience, further exemplifies this focus. Additionally, Agmatix, ICL's AdTech digital start-up, has been recognized for its work on regenerative agriculture, offering platforms that help agronomists implement environmentally friendly crop strategies. These technological advancements contribute directly to ICL's competitive moat by offering differentiated, high-value products that command better margins and foster customer loyalty, particularly in markets increasingly prioritizing sustainability and efficiency.

Competitive Positioning and Market Dynamics

ICL operates in a competitive landscape against major players like Nutrien Ltd. , The Mosaic Company , CF Industries Holdings, Inc. (CF), and Albemarle Corporation , each with distinct strengths. While competitors like Nutrien (NTR) and Mosaic often leverage scale in commodity fertilizers, ICL's diversified portfolio and emphasis on specialized, value-added products provide a qualitative edge. ICL's unique access to the Dead Sea for potash and bromine extraction offers a cost advantage that competitors cannot easily replicate, contributing to its strong market share in these areas. For instance, the Dead Sea accounts for approximately two-thirds of global bromine supply capacity, making ICL a dominant force.

In the phosphate sector, ICL's ability to flex its YPH operations between commodity and specialty production, including battery materials, provides strategic flexibility that differentiates it from more agriculture-centric producers like Mosaic (MOS). Against specialty chemical players like Albemarle (ALB), ICL's integrated approach, leveraging by-products from its core operations, can offer a cost-effective pathway to new product development, particularly in areas like flame retardants and battery materials. While direct quantitative comparisons of market share for all niche products are challenging to ascertain, ICL's consistent growth in its specialty segments and strategic partnerships in emerging areas like LFP production indicate a strong competitive stance.

The company's regional production strategy, with 60% to 70% of U.S. specialty sales produced locally, provides an important strategic advantage against potential tariff impacts and logistical disruptions. This local-for-local approach enhances supply chain resilience and responsiveness to customer needs, a critical factor in today's volatile global trade environment.

Financial Performance and Liquidity

ICL demonstrated a resilient financial performance in the second quarter of 2025, aligning with management's expectations despite a backdrop of global and regional uncertainties. Consolidated sales reached $1.832 billion, marking an approximate 5% increase year-over-year and a 4% rise on a quarterly basis. The strategic focus on specialties continued to bear fruit, with specialties-driven sales climbing 8% year-over-year to $1.496 billion. Adjusted EBITDA for the quarter stood at $351 million, with specialties-driven EBITDA at $259 million, both experiencing a slight sequential decrease. Adjusted diluted earnings per share was $0.09, consistent with the first quarter of 2025.

Operating cash flow saw a significant improvement, reaching $269 million in Q2 2025, an increase of over $100 million from the prior quarter. This robust cash generation underscores the company's operational efficiency and disciplined capital allocation.

For the full year 2024, ICL reported total sales of $6.841 billion and an adjusted EBITDA of $1.469 billion, with adjusted diluted earnings per share of $0.38. The company's balance sheet remains strong, boasting approximately $1.5 billion in available resources at the end of Q2 2025. The net debt to adjusted EBITDA ratio was a healthy 1.5x, and ICL successfully extended its debt maturity past 2030 with a $235 million offering, while S&P reaffirmed its BBB- credit rating with a stable outlook. ICL consistently returns value to shareholders, distributing 50% of adjusted net income as dividends, totaling $55 million in Q2 2025, resulting in a trailing 12-month dividend yield of 2.6%.

Outlook and Guidance: Navigating Opportunities

ICL's management has provided a clear outlook for 2025, reflecting confidence in its strategic direction while acknowledging ongoing challenges. The guidance for Specialties-driven businesses (Industrial Products, Growing Solutions, and Phosphate Solutions) remains robust, with expected EBITDA between $0.95 billion and $1.15 billion. This stability is underpinned by anticipated gradually improving market pricing trends and consistent performance across most end markets.

However, the 2025 potash sales volume guidance has been revised downwards to between 4.3 million and 4.5 million metric tons, from an earlier range of 4.5 million to 4.7 million metric tons. This adjustment primarily reflects production impacts at the Dead Sea due to ongoing war-related issues in Israel, including reservist call-ups affecting maintenance, and the brief 12-day war with Iran in June 2025. Despite these operational hurdles, management expects to narrow the manufacturing gap in the second half of 2025. The potash segment is anticipated to see improved profitability in Q3 2025, driven by higher average prices per ton as ICL transitions to new 2025 contracts with China and India, which are at more favorable rates than the previous year's agreements, and benefiting from stronger spot market transactions. Management estimates an additional $10 to $15 per ton increase in average potash price for ICL in Q3 compared to Q2.

The effective annual tax rate for 2025 is projected to average approximately 30%. ICL is actively monitoring the global tariff situation and pursuing mitigation efforts, with current calculations suggesting any impact for 2025 would be de minimis. For the Industrial Products and Growing Solutions segments, Q3 and Q4 2025 performance is expected to be largely similar to Q2 2025, with the main seasonal uplift in Q3 coming from the potash business.

Risks and Challenges

Despite a compelling investment thesis, ICL faces several pertinent risks. Geopolitical instability in Israel continues to pose operational challenges, including disruptions from reservist call-ups impacting maintenance and production at the Dead Sea operations. Logistics, particularly Red Sea transportation, have also presented hurdles, although ICL has implemented adjustments to enhance shipping flexibility. The brief 12-day war with Iran in June 2025 further impacted potash production, contributing to the revised guidance.

The construction end market, a key demand driver for certain Industrial Products, remains soft globally, with no significant turnaround expected in the near term for the U.S., Europe, or China, where over-construction and inflated pricing issues persist. In the Brazilian market, a crucial region for Growing Solutions, significant liquidity issues, very high interest rates (around 15%), and potential trade disputes with the U.S. (including discussions of a 50% duty) introduce considerable volatility and risk. Furthermore, rising raw material costs, notably sulfur, which increased over 50% sequentially and nearly 250% annually in Q2 2025, can pressure margins in the Phosphate Solutions segment. The strengthening Israeli shekel against the U.S. dollar also results in higher expenses for ICL, as its business is primarily conducted in dollars. While management acknowledges the potential for demand destruction in the agricultural market due to fluctuating commodity prices, they do not foresee it significantly impacting ICL's ability to sell its products.

Conclusion

ICL Group stands as a compelling investment opportunity, strategically positioned at the intersection of essential minerals and high-growth specialty chemicals. Its deliberate transformation into a specialties-driven company, underpinned by unique resource advantages and a robust innovation pipeline, is yielding tangible results, as evidenced by consistent performance in its specialty segments and strong Q2 2025 financials. The company's technological leadership in sustainable flame retardants, advanced battery materials, and cutting-edge ag biologicals provides a durable competitive moat, enabling market share gains and access to burgeoning industries.

While geopolitical headwinds and market-specific challenges, particularly in potash production and the volatile Brazilian agriculture sector, necessitate careful monitoring, ICL's proactive risk mitigation, disciplined capital allocation, and commitment to maximizing profitability across its diverse portfolio underscore its resilience. The anticipated uplift in potash prices in the latter half of 2025, coupled with sustained growth in its specialty businesses, paints a positive outlook. For discerning investors, ICL offers a unique blend of foundational stability, innovative growth drivers, and a clear strategic roadmap to capitalize on evolving global demands for sustainable and high-performance solutions.