Q2 2017 Results

Asher Grinbaum | Acting CEO August 3 rd , 2017

Important Legal Notes

Disclaimer and Safe Harbor for Forward-Looking Statements

The information contained herein in this presentation or delivered or to be delivered to you during our presentation does not constitute an offer, expressed or implied, or a recommendation to do any transaction in Israel Chemicals Ltd. ("ICL" or "Company") securities or in any securities of its affiliates or subsidiaries.

This presentation and/or other oral or written statements made by ICL during its presentation or from time to time, may contain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable securities laws. Whenever words such as "believe," "expect," "anticipate," "intend," "plan," "estimate", "predict" or similar expressions are used, the Company is making forward-looking statements. Such forward-looking statements may include, but are not limited to, those that discuss strategies, goals, financial outlooks, corporate initiatives, existing or new products, existing or new markets, operating efficiencies, or other non-historical matters.

Because such statements deal with future events and are based on ICL's current expectations, they could be impacted or be subject to various risks and uncertainties, including those discussed in the "Risk Factors" section and elsewhere in our Annual Report on Form 20-F for the year ended December 31, 2016, and in subsequent filings with the Tel Aviv Securities Exchange (TASE) and/or the U.S. Securities and Exchange Commission (SEC). Therefore actual results, performance or achievements of the Company could differ materially from those described in or implied by such forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can provide no assurance that expectations will be achieved. Except as otherwise required by law, ICL disclaims any intention or obligation to update or revise any forward-looking statements, which speak only as of the date hereof, whether as a result of new information, future events or circumstances or otherwise. Readers, listeners and viewers are cautioned to consider these risks and uncertainties and to not place undue reliance on such information.

Certain market and/or industry data used in this presentation were obtained from internal estimates and studies, where appropriate, as well as from market research and publicly available information. Such information may include data obtained from sources believed to be reliable, however ICL disclaims the accuracy and completeness of such information which is not guaranteed. Internal estimates and studies, which we believe to be reliable, have not been independently verified. We cannot assure that such data is accurate or complete.

Included in this presentation are certain non-GAAP financial measures, such as Adjusted Operating income and Adjusted Net income, designed to complement the financial information presented in accordance with IFRS because management believes such measures are useful to investors. These non-GAAP financial measures should be considered only as supplemental to, and not superior to, financial measures provided in accordance with IFRS. Please refer to our Q2 2017 press release for the quarter ended June 30, 2017 for a reconciliation of the non-GAAP financial measures included in this presentation to the most directly comparable financial measures prepared in accordance with IFRS.

Q2 2017 Results Summary

Solid performance in a challenging environment driven by Industrial Products and Advanced Additives business units
Significant consecutive and year-over-year improvement in YPH JV's financial results
Continuous demonstration of balance sheet strength driven by a reduction in G&A and strong positive free cash flow
Agreement signed to sell IDE, another step in ICL's plan to divest low-synergistic businesses

\$ millions	Q2 17	Q2 16	% change	Q1 17	% change
Sales	1,322	1,377	(4.0)%	1,295	2.1%
Operating income	144	149	(3.4)%	116	24.1%
Adjusted operating income	153	163	(6.1)%	116	31.9%
Net income	57	120	(52.5)%	68	(16.2)%
Free Cash flow	86	85	1.2%	104	(17.3)%
External potash sales (thousand tonnes)	1,051	1,010	4.1%	942	11.6%
Average potash selling price - FOB	216	221	(2.3)%	216	-

See Q2 2017 press release for a reconciliation of Adjusted operating income to operating income and Adjusted net income to net income. Free cash flow = operating cash flow –purchases of property, plant and equipment and intangible assets + dividends from equity-accounted investees (also included in "other")

Main Quarter Highlights

Business Environment ICL Perspective

Late signing of Chinese & Indian contracts
Continued weakness in commodity fertilizer prices, mainly phosphates
Strengthening of the NIS vs. the US dollar
Increased seaborne freight rates
Ammonia shortage in Israel
Solid specialties performance, fueled by Industrial Products and Advanced Additives
YPH JV operational improvement
Strong cash flow generation
G&A expenses reduction, reduced CapEx
Catalan Supreme court's resolution enables ICL Iberia to continue operations at the Sallent site one more year, with an option for another year
Rotem phosphogypsum spill incident

Business Performance & Major Developments

\$ million	Q2 2017	Q2 2016	% change
Sales*	640	667	(4.0)%
Division O/I**	135	136	(1.0)%

Strong quarter for ICL Advanced Additives driven by higher acid and fire safety sales.
Strong operating profit in ICL Industrial Products despite seasonally weaker bromine prices, attributed to cost reductions and higher Phosphorus-based FRs and completion fluids sales.
ICL Food Specialties' dairy protein sales continue to face lower volumes due to a major customer's destocking activity. Nevertheless, Q2 sales increased compared to Q1 2017.

Specialty Solutions

Year-over-year increase in potash volumes sold. Potash shipments to China expected to significantly increase sales and operating income in 2H2017.
Commodity phosphate fertilizer market continues to operate under a challenging business environment.
Continued operational improvements in our YPH JV and a shift to specialties drive significantly lower operating loss.
Q2 2016 results were positively impacted by \$26 million income from insurance.
Catalan court adopts ICL's roadmap, enabling one more year (with an option for a second year) of continuous operations at Sallent site. Local authorities allows continued use of existing port facilities while we complete works at the new port terminal.

* Including inter-business lines' sales

** Excluding G&A, unallocated expenses and eliminations

Phosphogypsum Water Spill at Rotem – Committed to Environmental Restoration

Financial Results

Kobi Altman CFO

Main Financial Figures and Analysis

\$ millions	Q2 17	Q2 16	% change	Q1 17	% change
Sales	1,322	1,377	(4.0)%	1,295	2.1%
Gross profit	415	417	-	358	15.9%
Operating income	144	149	(3.4)%	116	24.1%
Adjusted operating income	153	163	(6.1)%	116	31.9%
Net income	57	120	(52.5)%	68	(16.2)%
Capital Expenditures	109	196	(44.4)%	112	(2.7)%
Free cash flow*	86	85	1.2%	104	(17.3)%

Q2 2017 Sales (\$M) Q2 2017 Adjusted operating income (\$M)

Free cash flow = operating cash flow –purchases of property, plant and equipment and intangible assets + dividends from equity-accounted investees (also included in "other")

Numbers may not add up due to rounding and set offs

Finance Expenses

\$ million	Q2 2017	Q2 2016	Q1 2017
Financial debt	3,412	3,662	3,383
Interest rate	3.4%	3.0%	3.2%
Net interest expenses	28.1	23.2	27.7

Revaluation of long-term pension liabilities	10.3	(2.4)	7.9
Hedging transactions	(5.0)	16.8	(24.3)
Special items	14.9	2.0	3.6
	20.2	16.4	(12.8)

Net financial expenses	48.3	39.6	14.9

Effective Tax Rate Impacted by Exceptional Items

\$ million	Q2 2017	Q2 2016	FY2016 Adjusted
Profit before tax	96	116	506
Income and Natural resources tax	31	29	122
Effective tax rate	32%	25%	24%
Special items	4	---	26
Post special items	35	29	148
Post special items Tax rate	36%	25%	29%
NIS strengthening and deferred tax assets recognition	6	(24)	(48)
Post impact of NIS strengthening and DTA recognition	41	5	100
Effective tax rate	43%	4%	20%