Fertilizers

ICL FERTILIZERS - ONE OF THE MOST INTEGRATED FERTILIZER COMPANIES IN THE WORLD

With a concession to mine the Dead Sea, ICL Fertilizers enjoys access to one of the world's most abundant and low-cost sources of potash. It is one of the world’s largest producers of potash and an integrated producer of a variety of products based on phosphate rock mined in Israel's Negev desert, including phosphate fertilizers, phosphoric acid and specialty fertilizers.

ICL Fertilizers, together with other segments of ICL, operates Mifalei Tovala, one of Israel’s largest land transportation companies, to transport bulk and general cargo, including potash, chemicals and hazardous materials, for ICL and other customers.

2006 Sales (%)

ICL Fertilizers at a Glance

2006 Revenues: $1.45 billion (including ~$158 million in internal sales)
% of ICL Revenues: 42%
Operating Income: $263 million
Revenues by product segments (external sales): 61% potash; 39% fertilizers and phosphates
Market Leader: 6th largest producer of potash in the world, 2nd largest in Western Europe (~10% of worldwide production of potash); #1 largest producer of PK fertilizers
Major Markets: Western Europe, Brazil, India, China and Israel

Products

Potash: 5,086 thousand tons produced in 2006 (~10% of world production)
Phosphate rock: 2,949 thousand tons produced in 2006, ~90% used in the manufacture of phosphate fertilizers and phosphoric acid
Phosphoric acid (fertilizer grade): 504 thousand tons(P2o5) produced in 2006
PK fertilizers(compound potash and phosphate fertilizers)
Liquid and fully soluble fertilizers (MKP and others)

Market Dynamics

Demand: World demand for potash and phosphate-based fertilizers is estimated to grow at 2-3% per year (according to Fertecon) due to increases in the world population, growing nutrition requirements, demand for renewable fuels and increased adoption of balanced fertilizing strategies in developing regions (India, China and others). Significant rises in grain prices resulting from relatively low grain inventories and the growing use of grain to create “bio-fuels” are further increasing demand for fertilizer products. Deployment of sophisticated agricultural techniques (foliar spray, hydroponic greenhouses etc.) is raising demand for specialty fertilizers.

Supply: During 2006, Russia’s largest potash company, Uralkali, suffered a flood and closed a major potash mine with annual production of 1.2 million tons and annual production capacity of 1.5 million tons. Since the end of 2005, there has been a 9% decrease in the production capacity of mono and diammonium phosphate (MAP/DAP) in the US arising from the closure of production facilities by Mosaic and US Agri-Chem.

Prices: Phosphate-based fertilizer prices increased considerably during the latter part of 2006.

Competitive Advantages

Low cost producer of potash resulting from ICL’s direct access to rich Dead Sea mineral resources and evaporation environment, together with decades of technological development and know-how in the areas of manufacturing and solar energy
Low cost shipper to Asia, Brazil, and Europe due to the geographical location of ICL plants in Israel, England and Spain and their access to the Mediterranean Sea, Red Sea and key ports
Virtually unlimited storage capacity of potash at the Dead Sea due to favorable climactic conditions generates significant overall savings
Marketing optimization: production facilities and marketing organizations are located at strategic locations throughout the world, facilitating ICL's ability to offer superb customer service in its target markets

Goals/Strategy

Continued expansion of potash marketing in regions where ICL Fertilizers has logistic and market advantages (primarily India, China and Brazil)
Continued measures to reduce the cost and environmental impact of the production of phosphate rock and related products. To this end, during 2006 ICL deployed innovative technologies enabling it to use less expensive varieties of phosphate rock in the production of produce phosphoric acid and downstream specialty fertilizers
Expand sales of specialty fertilizers and downstream products based on the availability of raw materials and by-products