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May 19, 2015 Investor and Analyst Day Nissim Adar, CEO, ICL Fertilizers
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Page 1: Investor and Analyst Day - Amazon Web Servicesiclgroupv2.s3.amazonaws.com/corporate/wp-content/uploads...Investor and Analyst Day Nissim Adar, CEO, ICL Fertilizers Safe Harbor All

May 19, 2015

Investor and Analyst Day Nissim Adar, CEO, ICL Fertilizers

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Safe Harbor

All statements in this communication, other than those relating to historical facts, are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended These forward-looking statements and projections are not guarantees of future performance and are subject to a number of assumptions, risks, projections and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such statements or projections. Important factors that could cause actual results to differ materially from our expectations include, among others: loss or impairment of business licenses or mining permits or concessions; natural disasters; failure to raise the water level in evaporation Pond 5 in the Dead Sea; accidents or disruptions at our seaport shipping facilities or regulatory restrictions affecting our ability to export our products overseas; labor disputes, slowdowns and strikes involving our employees; currency rate fluctuations; rising interest rates; general market, political or economic conditions in the countries in which we operate; pension and health insurance liabilities; price increases or shortages with respect to our principal raw materials; volatility of supply and demand and the impact of competition; changes to laws or regulations (including environmental protection and safety and tax laws or regulations), or the application or interpretation of such laws or regulations; government examinations or investigations; the difference between actual reserves and our reserve estimates; failure to integrate or realize expected benefits from acquisitions and joint ventures; volatility or crises in the financial markets; cyclicality of our businesses; changes in demand for our fertilizer products due to a decline in agricultural product prices, lack of available credit, weather conditions, government policies or other factors beyond our control; decreases in demand for bromine-based products and other industrial products; litigation, arbitration and regulatory proceedings; and war or acts of terror. More detailed information about factors that may affect our performance may be found in “Risk Factors” in our Annual Report Form 20-F filed with the U.S. Securities and Exchange Commission on March 20, 2015. Forward-looking statements and projections represent our views and are given only as of the date of this communication and we disclaim any obligation to update or revise them, whether as a result of new information, future events or otherwise, except as required by law.

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.

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• World population is growing, demand for food is steadily increasing

• Availability of arable lands is declining

All Basic Fundamentals are in Place to Support Long Term Growth of Fertilizers

• Specialty agriculture expansion

• Expansion of the middle class and increased standard of living

• Emerging markets fertilization standards have room to Improve

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Agriculture

ICL Dead Sea

ICL Rotem

ICL Turkey

5,855 Employees Worldwide

ICL Haifa

ICL UK

ICL Iberia

ICL Germany

ICL The Netherlands

Fuentes

Nutrisi Everris

A Global Manufacturer of Products that Fulfills Essential Needs in the Agriculture Market

Potash Fertilizers

Phosphate Fertilizers

Specialty Fertilizers

52% 26%

22%

ICLF 2014 Sales by Lines of Business ($3,400M** )

Of ICL’s Rev ($6,100 M)

56%

Americas* - 22%

Asia* - 27%

EMEA* - 51%

*Of 2014 sales **including inter-segment sales

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Distinctive Characteristics of Our Potash Sites

ICL Dead Sea Israel, Dead Sea

Evaporation Ponds

ICL UK North East England

Conventional mining

I. Advantageous geographical

location II. Polysulphate opportunity

III. Operational excellence

initiatives

ICL Iberia Spain, Catalonia

Conventional mining

I. Vast reserves - long life quality

asset II. Advantageous geographical

location, access to deep water port

III. Mid cost curve with opportunity to improve further from sites

consolidation

IV. Expansion initiatives underway V. Salt offtake agreement

I. Unlimited highly concentrated raw material source

II. Relatively low production cost, in the bottom of the cost curve

III. Strategic Geographic Advantage

IV. Unlimited open-air stockpiling capacity V. Ongoing operational excellence measures

% 2014 Production (5,100 K Tons)

13%

19%

68%

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Phosphate Line of Business

ICL Rotem

ICL Germany

ICL Turkey

ICL The Netherlands

• Employees No. : 1,482 FTE’s

• 2014 production: Phosphate Rock : 3,375 K Tons, Fertilizers: 1,591 K Tons, Acid (P2O5): 475 K Tons

• Successful cost reduction plan implementation at ICL Rotem –labor down by 10%, while P2O5 production up by 15%

• Strategic alliance with Yunnan Yuntianhua signed by the end of 2014 will almost double ICL’s global phosphate business and improve our Phosphate competitive position

• World scale phosphate rock mine with fully vertically integrated phosphate business and downstream operations

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Grow Our Core Business

Spain Phoenix

Africa /Ethiopia Danakhil project

UK Polysulphate

Africa /Ethiopia Potash for Growth

India Potash for life

China YPH

China YPH

Organic Growth

External Growth

SF Worldwide product development, crops and geographic

expansion

SF Worldwide Growth & innovation through M&A activity

Bulk Blend

Potash Business Line

Phosphate& Fertilizers Business Line

Specialty Fertilizers Business Line

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Leverage Growth Opportunities in Potash

Canada, 36%

Russia 16%

Belarus 15%

China, 10%

ICL, 8%

Germany 6%

Other, 4%

Jordan 3%

Chile 3%

ICL’s Market Share, 2014 (Total Sales: 5.1 M Tons)

ICL will capture 9%-16% of Market growth (0.3% - 1.8% Market share growth).

2014 to 2025 Market growth: 18Mt ICL’s Projected growth (vs. 2014) : 1.6-2.8 M

Tonnes/Year to ~8 M tonnes

62 79 80

0

50

2014 2020 2025

Demand (KT)

Annual Growth rate: 2.9%

Source: CRU

Million Tonnes ICL Growth 2015-2025

1.3 ICL Iberia: Phoenix I-IV

0.1- 0.5 ICL Dead Sea

0- (0.8) ICL UK

1.0 ICL Africa

2.8-1.6 Total

9

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ICL Iberia – Consolidation and Expansion

ICL Iberia operating capacity development - 2015-2027 (K tonnes)

• Phoenix I+ II (2017): capacity expansion of Suria to 1,080K tonnes, closure of Cabanasas mine, expansion of granular capacity to 1,030K tonnes.

• Phoenix III (2019): new crystallization plant aimed to expand Suria’s Center capacity by extra 200K tonnes of KCl and 500K tonnes of NaCl

• Phoenix IV (gradual, until 2024): a Brownfield project targeted to extend Suria’s Center production capacity by additional 1M tonnes of KCl

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

~1,000

~2,300

• Agreement with Akzonobel to produce and market 1.5M tonnes of vacuum salt and 50K tonnes of white potash annually

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Polysulphate™: The Future of ICL UK

Readily available new natural fertilizer in the market containing four nutrients: Sulphur, Potassium, Magnesium and Calcium

130

600

0

100

200

300

400

500

600

700

2014 2015 2016 2017 2018

Polysulphate production plan K Tonnes

50%

14% K

S

36% Mg+Ca

From Mine to Market, existing infrastructure, low production cost, high profit margins

Promising long term potential for up to 3 million tonnes

Reserves of more than 1 billion tonnes in the ICL UK potash mine

Already in the market, 60 k tonnes were sold in 2014. 2015 target: 150 k

tonnes

With an investment of £ 40 million, infrastructure will support production of 600 K tonnes. Additional investment of £ 40 million for granulation facility

Environmentally friendly, used in its natural form. No chemical processing or waste products

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Danakhil Potash Project - Ethiopia

Ethiopia

• Our gate to Africa

Acquisition of Allana will enable ICL to accelerate the development of Allana’s concession to mine potash in Ethiopia

Allana estimates that its Danakhil project could yield up to one million tonnes of potash production per year for 25 years

Over the past year ICL has accelerated its market development efforts in Africa by sponsoring the “potash for growth” program

ICL to acquire full ownership of Allana potash (remaining 84%) for C$ 0.5 per share , C$ 137 million in total

Ethiopia

Location: Afar region, 800 km north of Addis Ababa, 600 km west of nearest port of Djibouti (export destination port); arid desert

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ICL to Establish Bulk Blending Facilities Across Ethiopia to Support Demand Growth

Bulk Blending - fertilizer plant designed to blend several nutrients. The final formula is determined according to the crop needs and availability of nutrient in the soil

Several locations has been investigated

First Bulk Blend was already established in Tulu Bolo by the Ethiopian Government

Djibouti Port

Allana Potash

Oromia

Amhara

SNNP

Tigray Mekele

Nekemte

Tulu Bolo

Worabe

Bahar Dar

• Alternatives examined by ICL • Sites where the Ethiopian Government established or intend to

establish BB facilities without any private business partner

Fertilizers are considered as a strategic commodity in Ethiopia

The plants are design to serve an area of about 200Km radius, use 150 k tonnes of potash annually through various number of formulas

The Ethiopian Gov. is defining the preferred cooperation model between the public and private sectors

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780.00

Specialty FertilizersKT p.a.

14

Strategic Alliance with Yunnan Yuntianhua– a Step Change to ICL’s Global Phosphate Business

Kunming

• 50% in a fully vertically integrated phosphate business including a world scale phosphate rock mine and integrated downstream operations

• A 15% stake in Yunnan Yuntianhua Co. Ltd., China’s leading producer of phosphate rock and fertilizers

3.50

0

1

2

3

4

5

6

7

Phosphate Rock, MT p.a.

2.5

3.5

6.0

30 years of Reserves

8 Years of Reserves

0250500750

1,0001,2501,5001,7502,0002,2502,5002,7503,000

Fertilizers KT p.a.

850

1,800

2,700

600.00

0250500750

1,0001,2501,5001,7502,0002,2502,5002,7503,000

Phosphoric AcidKT p.a.

700

600

1,300

780

115

0250500750

1,0001,2501,5001,7502,0002,2502,5002,7503,000

Specialty PhosphoricAcid

KT p.a.

290 60

350 895

ICL Standalone YPH Add. production

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Strategic Rationale

Expanding End Market Reach to Fulfil Essential

Needs in the Fast Growing Chinese and

Asian Markets

Expand ICL’s Global Specialty Phosphates

Business through Competitive Backward

Integration

Implement Proven Business Model –

Converting Commodity into Specialty

Utilizing Expertise between Both

Companies

3.5

700

600

Financial Highlights

JV sales to increase from ~$550M to ~$700M

Commodity / Specialty sales volumes ratio to develop from 90%/10% to 50%/50%

Revenues

Expand EBITDA margins from low teens to high teens within 5 years

Margin expansion

At least $30M per year, achieved within 5 years, with a potential to double this amount

Synergies

~$340M spread over 4 years starting from the closing

CAPEX

$452 million for the JV and the listed company

Deal value

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Yunnan Yuntianhua - China’s Leading Producer of Phosphate Rock and Fertilizers

Top 10 producers by phosphoric acid capacity 2013-2014

Phosphate Fertilizer,

Phosphate Rock 43%

Trade (Phosphate Fertilizer)

16%

Trade & Logistics (Grain)

23%

Trade (Others) 11%

Engineered Materials

2%

Nitrogen Fertilizer 5%

Revenue RMB55.9bn

$9.2bn

China’s leading producer of phosphate rock and fertilizers with approximately $9 billion in annual revenues

The phosphate value chain accounts for ~60%

of total revenue

China’s leading producer of phosphate rock and fertilizers with approximately $9 billion in annual revenues

Phosphate Fertilizer,

Phosphate Rock 71%

Trade (Phosphate Fertilizer)

4%

Trade (Grain) 11%

Trade (Others) 3%

Nitrogen Fertilizer 11%

Gross Profit RMB7.2bn

$1.2bn

The phosphate value chain accounts for ~75% of total gross

profit

Location of Production Facilities

Kunming

Beihai port

▪ Multiple sites (<100Km apart) in Yunnan Province near Kunming

▪ Distance to closest port (Beihai) is ~1,000km ▪ Own logistics (train) network

2014

2013

• Added a short talking point

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Operational excellence: Improve Our Competitiveness in the Global Markets

Cost structure improvement / cost per

tonne reduction

Increased production / process optimization /

yield increase

Mindset & Behaviors

Management Infrastructure

Our Operational Excellence program is

designated to formulate and integrate

organization wide Best Practices for all of our

operations on a global scale, instituting

excellence while enabling our managers and

employees to work better and smarter.

2014 2015 2016

Potash

2014 2015 2016

ACE and other efficiency initiatives

Operational excellence

Phosphate & Specialty Fertilizers

* Actual, Compared to 2013

41

107

210

30

54

78

M

M

Technical Systems

Contribution to EBIT – by project:

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Improving Our Cost Position in Potash

ICL Iberia ICL UK

Co

st

2/3 of ICL’s effective capacity

Potash volume

*Source: CRU, McKinsey & Company, ICL estimates. Excluding Royalties

ICL Dead Sea ICL Africa

Future project

Potash Cash Cost Curve – FOB $ / Tonne * - Abstract Model

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Improving Our Cost Position in Phosphate

19

Site

co

sts

Yunnan

Source: CRU, November 2014.

3 Open Pit Mines Restored Mine

Site Capacity

The strategic alliance in China will secure ICL's access to competitive phosphate rock for several decades

Cost reduction in ICL’s existing production base Establishing new low cost

phosphate base

Phosphate rock cost curve (abstract model):

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Successful Implementation of Operational Excellence and Efficiencies

20

Average headcount decreased by 9% in Q1 15 vs Q1 14

Green phosphoric acid Production increased by over 40% vs Q1 14

White phosphoric acid production cost decreased by 6% vs Q1 14 despite an increase in sulfur prices of 41%

Additional upside from downstream specialty products

Demonstrated Efficiency at ICL Rotem

Improving operations at ICL UK

Potash production has increased by over 40% vs Q1 14

Polysulphate production increased by 150% Cost /tonne over 20% lower vs 2014 average Operating margins in the last 6 months

about 20% higher than 2013 average, despite lower potash prices

0.0%

5.0%

10.0%

15.0%

20.0%

25

75

125

175

225

Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15

ICL Rotem performance

Green Phosphoric Acid production '000t

Operating income %

Linear (Sulhpur price trend line*)

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

75

125

175

225

Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15

ICL UK performance

Potash production '000t Operating income %

Linear (Potash price trend line**)

* Middle east spot FOB ** Std potash Vancouver FOB

Sulphur price trend line*

Potash price trend line**

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21

Key Takeaways

1,620

536

Revenues Operating profit

1522

133

Revenues Operating profit

2014 results - Potash

2014 results - Phosphates & Fertilizers

$ million

$ million

Solid position in our markets supported by distinctive logistical advantages

Potash capacity expansion to capture the demand growth expected in our strategic markets

Operational excellence initiatives to reduce cost per tonne and improve competitive position

Strategic alliance in China – a major step to solidify our phosphate and specialty fertilizers businesses

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Thank You


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