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ICL Group Ltd. Investor Presentation 2021
6843_rns_2021-05-06_b1fdbae1-e83d-457a-b5f0-a6076305ffdf.pdf
Investor Presentation
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First Quarter 2021
Financial Results
R a v i v Z o l l e r May 6, 2021 President and CEO
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 this presentation does not constitute an offer, expressed or implied, or a recommendation to do any transaction in ICL Group Ltd. (ICL Group or company) securities or in any securities of its affiliates or subsidiaries.
This presentation and/or other oral or written statements made by ICL Group 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, its 2021 guidance, 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 Group's current expectations, they could be impacted or be subjected to various risks and uncertainties, including those discussed in the "Risk Factors" section and elsewhere in the company's Annual Report on Form 20-F for the year ended December 31, 2020, and in subsequent filings with the Tel Aviv Stock 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 the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can provide no assurance expectations will be achieved. Except as otherwise required by law, ICL Group 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 Group disclaims the accuracy and completeness of such information, which is not guaranteed. Internal estimates and studies, which the company believes to be reliable, have not been independently verified. The company cannot assure such data is accurate or complete.
Included in this presentation are certain non-GAAP financial measures, such as adjusted operating income, adjusted EBITDA, adjusted net income, adjusted EPS, segment EBITDA, segment EBITDA margin and free cash flow, designed to complement the financial information presented in accordance with IFRS because management believes such measures are useful to investors. Please note other companies may calculate similarly titled non-GAAP financial measures differently than ICL Group and definitions of these measures may differ from those used by other companies or such companies may use other measures to evaluate their performance, which may reduce the usefulness of our non-GAAP financial measures as tools for comparison. 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 the company's first quarter 2021 press release for the period ended March 31, 2021, and the appendix to this presentation 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.
1Q'21 Highlights
Industrial Products
Record quarter, driven by strong demand and high market prices and bolstered by long-term contracts
Record production in first quarter at the Dead Sea, completion of Iberia ramp project
Phosphate Potash Solutions
Record food specialties and YPH results driven by product innovation, cost efficiencies and shift to specialties
Innovative Ag Solutions
Record results due to strong demand, higher volumes and improved mix plus strategic actions
All divisions contributed to strong quarterly results
Creating impact and sustainable growth
Committed to growing in our target markets
• Investments in capacity expansions helping to meet long-term demand
• Strategic additions to leadership and BoD reinforce commitment to food specialties growth
Industrial Food Agriculture
• Acquisitions expected to position ICL as Brazil's leading specialty plant nutrition company
Advancing through organic growth and M&A
(1) EBITDA is a non-GAAP financial measure; see reconciliation tables in appendix.
First quarter 2021
Key financial highlights
| US\$M | 1Q'21 | 1Q'20 | YoY Change |
|---|---|---|---|
| Sales | \$1,510 | \$1,319 | 14% |
| Gross profit | \$495 | \$400 | 24% |
| Gross margin | 32.8% | 30.3% | 250 bps |
| Operating income | \$185 | \$132 | 40% |
| Operating margin | 12.3% | 10.0% | 230 bps |
| Net income, attributable | \$135 | \$60 | 125% |
| EBITDA(1) | \$295 | \$250 | 18% |
| EBITDA margin | 19.5% | 19.0% | 50 bps |
| Diluted earnings per share | 11.00¢ | 5.00¢ | 120% |
| Dividend per share | 5.25¢ | 2.30¢ | 128% |
| Operating cash flow | \$206 | \$166 | 24% |
Industrial Products
End-market recovery continues
Key highlights
- Record sales and EBITDA, benefitting from continued strategic shift to long-term contracts
- Higher bromine prices in China
- Higher input costs, including shipping, as well as raw material constraints
- End market recovery continued, as electronics and construction remain strong
- Automotive picking up, but oil and gas recovery lagging
- Specialty minerals' record profit driven by higher prices and MgCI sales
- Remained focused on value over volume
- More than 50% of agreements are long-term
- New TBBA plant at full capacity
(1) Segment EBITDA is a non-GAAP financial measure; see reconciliation tables in appendix.
Potash
Global demand supported higher potash prices
(1) Segment EBITDA is a non-GAAP financial measure; see reconciliation tables in appendix.
Key highlights
- Strong growth in sales and EBITDA
- Grain price increases, due to strong global demand
- Average realized price per ton up only 3% YoY
- Signed agreement with IPL (India) in April for \$280 per ton, a \$50 increase YoY
- Dead Sea: record first quarter production of +1Mt, with annual one-week shutdown completed in April
- ICL Iberia: ramp between Cabanasses mine and Suria plant now operational, following three-week shutdown
Phosphate Solutions
Strong food specialties growth and commodity upcycle
(1) Segment EBITDA is a non-GAAP financial measure; see reconciliation tables in appendix.
Key highlights
- Record sales and EBITDA
- Phosphate fertilizer prices continued significant recovery across all markets
- Major raw material prices increased, mainly sulfur
- Strong results for phosphate food specialties
- Higher volume for food phosphates and acids, with lower operating costs and favorable FX
- Food demand remained stable, with industrial end-market demand recovering
- Benefitted from global presence, with regional production network
- Record quarter for YPH
- Higher prices and volumes, combined with purchasing and production efficiencies
Innovative Ag Solutions
Strong demand and innovation driving record results
Key highlights
- Record sales and EBITDA
- Strong demand in Europe, the U.S. and Asia
- Higher volumes and improved product mix
- Benefitted from unified sales and marketing organization
- Geographic expansion and new product launches
- Record turf and ornamental sales up more than 25% YoY
- Specialty agriculture sales up double-digits YoY
(1) Segment EBITDA is a non-GAAP financial measure; see reconciliation tables in appendix.
1Q'20 1Q'21
Strategic Acquisitions
Expected to position ICL as Brazil's leading specialty plant nutrition company
- Acquiring Compass Minerals América do Sul S.A. for ~US\$400M
- Fertiláqua integrated into ICL results, beginning in January 2021
- Compass overview
- Broad range of solutions cover all key crops in Brazil
- Existing presence in 25 out of 26 Brazilian states
- Serves +32,000 farms directly and indirectly, with direct-to-farm ~50% of total sales
- FY'20 net revenue of ~US\$284M, with EBITDA of ~\$46M
- Expands product portfolio and profitability and provides balance between hemispheres
- Expect benefits from combining ICL, Compass and Fertiláqua
Key takeaways Building on strategic fundamentals
- Sales for 1Q'21 crossed \$1.5B for first time since 2014
- Each business segment driving toward strategic targets
- Bromine capacity expansion meeting demand from shift to more profitable long -term contracts
- Looking at additional investments and innovation
- Phosphate Specialties consistent growth over past 18 months
- Growth shifting from traditional phosphates to specialties, including alternative proteins
- IAS 1Q'21 profitability greater than FY'19
- Poised to accelerate growth, by leveraging acquisitions in Brazil
- Potash production record in 1Q'21
- Additional capacity expected online in Iberia
First Quarter 2021
Financial Results
K o b i A l t m a n
CFO
Financial strength
Continued growth in cash flow
Highlights for 1Q'21
- Liquidity of \$1.1B available
- Funded Fertiláqua acquisition in January
- Operating cash flow of \$206M vs. \$166M in 1Q'20
- Free cash flow(1) of \$59M vs. \$28M in 1Q'20
- Net debt to EBITDA of 2.4 times
- No major principal debt repayments in short - or mid -term
(1) Free cash flow is a non -GAAP financial measure; see reconciliation tables in appendix. Note: Liquidity is comprised of available credit facilities and cash and short -term deposits.
Pricing across mineral value chain
Commodity price upcycle
Sources: CRU and Bloomberg, as of 3.31.21.
Cost input pricing
Significant increases in raw materials and freight rates
First quarter 2021
Sales and profit bridges
First quarter 2021
Results by segment
(1) EBITDA is a non-GAAP financial measure; see reconciliation tables in appendix. Note: Numbers rounded to closest million.
Guidance Full year 2021
Raising expectations
- Expect adjusted EBITDA range of \$1,090 million to \$1,175 million(1)
- Improved market conditions combined with prompt execution in 1Q'21
- Probability of achieving high-end of original guidance has risen considerably
Thank you
Contact [email protected] for more information on ICL View our interactive data tool at https://investors.icl-group.com/interactive-data-tool/default.aspx
Appendix First Quarter 2021
F i n a n c i a l R e s u l t s
| Industrial Products US\$M | 1Q'21 | 1Q'20 |
|---|---|---|
| Segment sales | \$398 | \$364 |
| Sales to external customers | \$394 | \$361 |
| Sales to internal customers | \$4 | \$3 |
| Segment profit | \$105 | \$103 |
| Depreciation and amortization | \$17 | \$17 |
| Capital expenditures | \$17 | \$21 |
| Segment EBITDA | \$122 | \$120 |
| US\$M | Sales | |
|---|---|---|
| 1Q'20 | \$364 | |
| Quantities | \$20 | |
| Prices | \$7 | |
| Exchange rates | \$7 | |
| 1Q'21 | \$398 |
| US\$M | Segment EBITDA | |
|---|---|---|
| 1Q'20 | \$120 | |
| Quantities | \$4 | |
| Prices | \$7 | |
| Exchange rates | (\$1) | |
| Raw materials | (\$3) | |
| Energy | \$1 | |
| Transportation | (\$2) | |
| Operating and other expenses |
(\$4) | |
| 1Q'21 | \$122 |
| Potash US\$M | 1Q'21 | 1Q'20 |
|---|---|---|
| Segment sales | \$385 | \$314 |
| Sales to external customers | \$254 | \$226 |
| Sales to internal customers | \$22 | \$23 |
| Other and eliminations(1) | \$109 | \$65 |
| Gross profit | \$138 | \$96 |
| Segment profit | \$29 | \$14 |
| Depreciation and amortization | \$37 | \$39 |
| Capital expenditures | \$65 | \$61 |
| Average realized price(2) | \$257 | \$250 |
| Segment EBITDA | \$66 | \$53 |
| Potash production and sales 000s of tons |
1Q'21 | 1Q'20 |
|---|---|---|
| Production | 1,152 | 1,145 |
| Total sales, including internal sales | 1,075 | 996 |
| Closing inventory | 353 | 563 |
| US\$M | Sales |
|---|---|
| 1Q'20 | \$314 |
| Quantities | \$37 |
| Prices | \$22 |
| Exchange rates | \$12 |
| 1Q'21 | \$385 |
| US\$M | Segment EBITDA |
|---|---|
| 1Q'20 | \$53 |
| Quantities | \$10 |
| Prices | \$22 |
| Exchange rates | (\$7) |
| Energy | \$1 |
| Transportation | (\$9) |
| Operating and other expenses |
(\$4) |
| 1Q'21 | \$66 |
Note: Segment EBITDA is a non-GAAP financial measure; see reconciliation tables.
(1) Primarily includes salt produced in the UK and Spain, Polysulphate and Polysulphate-based products, magnesium-based products, and sales of electricity produced in Israel; (2) Potash average realized price (USD per ton) is calculated by dividing total potash revenue by total sales quantities. The difference between FOB price and average realized price is primarily marine transportation costs.
External potash metrics
Average market prices and imports
| Average prices | 1Q'21 | 1Q'20 | YoY Change | 4Q'20 | QoQ Change |
|---|---|---|---|---|---|
| Granular potash – Brazil CFR spot US\$ per ton |
\$283 | \$245 | 15.5% | \$248 | 14.1% |
| Granular potash – Northwest Europe CIF spot/contract € per ton |
\$235 | \$255 | (7.8%) | \$234 | 0.4% |
| Standard potash – Southeast Asia CFR spot US\$ per ton |
\$248 | \$258 | (3.9%) | \$240 | 3.3% |
| Potash imports in millions of tons | |||||
| To Brazil | 2.2 | 1.6 | 37.5% | 2.9 | (24.1%) |
| To China | 2.6 | 2.1 | 23.8% | 2.0 | 29.4% |
| To India | 0.75 | 0.69 | 8.7% | 1.1 | (31.8%) |
| Phosphate Solutions US\$M | 1Q'21 | 1Q'20 |
|---|---|---|
| Segment sales | \$545 | \$502 |
| Sales to external customers | \$525 | \$483 |
| Sales to internal customers | \$20 | \$19 |
| Segment profit | \$40 | \$9 |
| Depreciation and amortization | \$54 | \$49 |
| Capital expenditures | \$51 | \$61 |
| Phosphate Solutions US\$M | 1Q'21 | 1Q'20 |
|---|---|---|
| Segment sales | \$545 | \$502 |
| Specialty | \$294 | \$279 |
| Commodity | \$251 | \$223 |
| Segment profit | \$40 | \$9 |
| Specialty | \$35 | \$28 |
| Commodity | \$5 | (\$19) |
| Segment EBITDA | \$94 | \$58 |
| Specialty | \$48 | \$43 |
| Commodity | \$46 | \$15 |
1Q'21 \$94 Note: Segment EBITDA is a non-GAAP financial measure; see reconciliation tables.
| US\$M | Sales |
|---|---|
| 1Q'20 | \$502 |
| Quantities | (\$12) |
| Prices | \$30 |
| Exchange rates | \$25 |
| 1Q'21 | \$545 |
| US\$M | Segment EBITDA |
|---|---|
| 1Q'20 | \$58 |
| Quantities | (\$2) |
| Prices | \$30 |
| Exchange rates | \$3 |
| Raw materials | (\$11) |
| Energy | \$2 |
| Transportation | (\$4) |
| Operating and other expenses |
\$18 |
External phosphate metrics
Commodities market
| Average prices | 1Q'21 | 1Q'20 | YoY Change | 4Q'20 | QoQ Change |
|---|---|---|---|---|---|
| DAP CFR India spot |
\$455 | \$302 | 51% | \$369 | 23% |
| TSP CFR Brazil spot |
\$408 | \$252 | 62% | \$262 | 56% |
| SSP CPT Brazil inland 18% to 20% P O spot 2 5 |
\$206 | \$185 | 11% | \$179 | 15% |
| Sulfur Bulk FOB Adnoc Monthly contract |
\$138 | \$44 | 214% | \$74 | 86% |
Innovative Ag Solutions First quarter 2021
| Innovative Ag Solutions US\$M |
1Q'21 | 1Q'20 |
|---|---|---|
| Segment sales | \$241 | \$199 |
| Sales to external customers | \$238 | \$196 |
| Sales to internal customers | \$3 | \$3 |
| Segment profit | \$22 | \$14 |
| Depreciation and amortization | \$7 | \$5 |
| Capital expenditures | \$4 | \$3 |
| US\$M | Sales |
|---|---|
| 1Q'20 | \$199 |
| Quantities | \$24 |
| Prices | \$1 |
| Exchange rates | \$17 |
| 1Q'21 | \$241 |
| US\$M | Segment EBITDA |
|---|---|
| 1Q'20 | \$19 |
| Quantities | \$6 |
| Prices | \$1 |
| Exchange rates | \$2 |
| Raw materials | \$3 |
| Energy | \$0 |
| Transportation | \$0 |
| Operating and other expenses |
(\$2) |
Consolidated results analysis
First quarter 2021
| US\$M | Sales | Expenses | Operating Income |
Notes |
|---|---|---|---|---|
| 1Q'20 | \$1,319 | (\$1,187) | \$132 | |
| Prices | \$61 | - | \$61 | Positive – \$7 increase in average realized price per ton of potash YoY Positive – higher selling prices for phosphate commodities, FertilizerspluS products and elemental bromine |
| Volumes | \$68 | (\$53) | \$15 | Positive – higher sales of bromine-based flame retardants Positive – higher sales of potash, acids and IAS segment products Negative – lower sales volumes of clear brine fluids and phosphate fertilizers |
| Exchange rates | \$62 | (\$67) | (\$5) | Negative – appreciation of average exchange rate for Israeli shekel vs. U.S. dollar increased operational costs |
| Raw materials | (\$12) | (\$12) | Negative – higher prices of sulfur consumed during quarter |
|
| Energy | \$3 | \$3 | ||
| Transportation | (\$15) | (\$15) | Negative – higher marine transportation rates |
|
| Operating and other expenses |
\$6 | \$6 | Positive – increased production at Rotem Israel and YPH JV, cost reduction initiatives |
|
| 1Q'21 | \$1,510 | (\$1,325) | \$185 |
Sales by geographic location First quarter 2021
| Sales US\$M |
Industrial Products |
Potash | Phosphate Solutions |
Innovative Ag Solutions |
Other Activities | Reconciliations | Consolidated | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1Q'21 | 1Q'20 | 1Q'21 | 1Q'20 | 1Q'21 | 1Q'20 | 1Q'21 | 1Q'20 | 1Q'21 | 1Q'20 | 1Q'21 | 1Q'20 | 1Q'21 | 1Q'20 | |
| Europe | \$144 | \$127 | \$180 | \$148 | \$187 | \$188 | \$129 | \$107 | \$7 | \$8 | (\$19) | (\$18) | \$628 | \$560 |
| Asia | \$130 | \$106 | \$75 | \$65 | \$142 | \$108 | \$41 | \$32 | - | - | (\$4) | (\$3) | \$384 | \$308 |
| North America | \$95 | \$107 | \$57 | \$19 | \$114 | \$98 | \$31 | \$26 | \$1 | - | (\$3) | (\$1) | \$295 | \$249 |
| South America | \$13 | \$11 | \$29 | \$34 | \$58 | \$62 | \$10 | \$5 | - | - | (\$1) | - | \$109 | \$112 |
| Rest of world | \$16 | \$13 | \$44 | \$48 | \$44 | \$46 | \$30 | \$29 | - | - | (\$40) | (\$46) | \$94 | \$90 |
| Total | \$398 | \$364 | \$385 | \$314 | \$545 | \$502 | \$241 | \$199 | \$8 | \$8 | (\$67) | (\$68) | \$1,510 | \$1,319 |
Finance expenses
First quarter 2021
| US\$M | 1Q'21 | 1Q'20 |
|---|---|---|
| Average net debt(1) | \$2,770 | \$2,684 |
| Weighted average interest rate | 3.8% | 4.0% |
| Interest expenses | \$26 | \$26 |
| Interest capitalization | (\$6) | (\$5) |
| Interest expenses, net | \$20 | \$21 |
| Total hedging and balance sheet revaluation | \$12 | \$38 |
| Interest and exchange rate impact on LT liabilities of leasing and employees and other(2) |
(\$12) | (\$7) |
| Net financial expenses | \$20 | \$52 |
(1) Average liabilities during given quarter. (2) Other for 1Q'20 includes \$4 million, due to shekel revaluation vs. U.S. dollar. Note: Numbers may not add, due to rounding and set-offs.
Effective tax rate
First quarter 2021
| US\$M | 1Q'21 | 1Q'20 |
|---|---|---|
| Income before tax(1) | \$165 | \$81 |
| Normalized tax rate | 20% | 21% |
| Normalized tax expenses | \$34 | \$17 |
| Carryforward losses not recorded for tax purposes and other | \$3 | \$6 |
| Exchange rate impact | (\$14) | (\$3) |
| Tax expenses | \$23 | \$20 |
| Effective tax rate | 14% | 25% |
| Tax adjustments | - | - |
| Reported provision for income taxes | \$23 | \$20 |
Reconciliation tables
Slide one of two
| Calculation of segment EBITDA and margin |
Industrial Products |
Potash | Phosphate Solutions |
Innovative Ag Solutions |
||||
|---|---|---|---|---|---|---|---|---|
| US\$M | 1Q'21 | 1Q'20 | 1Q'21 | 1Q'20 | 1Q'21 | 1Q'20 | 1Q'21 | 1Q'20 |
| Segment profit | \$105 | \$103 | \$29 | \$14 | \$40 | \$9 | \$22 | \$14 |
| Depreciation and amortization | \$17 | \$17 | \$37 | \$39 | \$54 | \$49 | \$7 | \$5 |
| Segment EBITDA | \$122 | \$120 | \$66 | \$53 | \$94 | \$58 | \$29 | \$19 |
| Segment EBITDA margin | 31% | 33% | 17% | 17% | 17% | 12% | 12% | 10% |
| Calculation of free cash flow US\$M | 1Q'21 | 1Q'20 |
|---|---|---|
| Cash flow from operations | \$206 | \$166 |
| Additions to PP&E and dividends from equity accounted investees(1) |
(\$147) | (\$138) |
| Free cash flow | \$59 | \$28 |
| Calculation of income before tax US\$M | 1Q'21 | 1Q'20 |
|---|---|---|
| Operating income | \$185 | \$132 |
| Finance expenses | (\$20) | (\$52) |
| Share in earnings (losses) of equity-accounted investees and adjustments to financial expenses |
- | \$1 |
| Income before tax | \$165 | \$81 |
(1) Also includes proceeds from sale of property, plants and equipment (PP&E). Note: Numbers may not add, due to rounding and set-offs..
Reconciliation tables
Slide two of two
| Calculation of adjusted EBITDA US\$M |
1Q'21 | 4Q'20 | 3Q'20 | 2Q'20 | 1Q'20 | FY'20 | FY'19 | FY'18 |
|---|---|---|---|---|---|---|---|---|
| Net income attributable to shareholders of the company |
\$135 | \$65 | \$54 | (\$168) | \$60 | \$11 | \$475 | \$1,240 |
| Financing expenses, net | \$20 | \$46 | \$29 | \$31 | \$52 | \$158 | \$129 | \$158 |
| Taxes on income | \$23 | \$24 | \$14 | (\$33) | \$20 | \$25 | \$147 | \$129 |
| Minority and equity profit, net | \$7 | \$4 | \$3 | \$1 | - | \$8 | \$5 | (\$8) |
| Operating income | \$185 | \$139 | \$100 | (\$169) | \$132 | \$202 | \$756 | \$1,519 |
| Minority and equity profit, net | (\$7) | (\$4) | (\$3) | (\$1) | - | (\$8) | (\$5) | \$8 |
| Depreciation and amortization | \$117 | \$129 | \$123 | \$119 | \$118 | \$489 | \$443 | \$403 |
| Adjustments(1) | - | \$4 | \$6 | \$297 | - | \$307 | \$4 | (\$766) |
| Adjusted EBITDA | \$295 | \$268 | \$226 | \$246 | \$250 | \$990 | \$1,198 | \$1,164 |
| Net debt to EBITDA(2) US\$M |
1Q'21 |
|---|---|
| Net debt | \$2,482 |
| EBITDA | \$1,035 |
| Net debt to EBITDA | 2.4 |
(1) See detailed reconciliation table – adjustments to reported operating and net income (non-GAAP) – in corresponding quarters' earnings release. (2) Quarterly net debt to EBITDA ratio was calculated by dividing net debt by past four quarters adjusted EBITDA. Note: Numbers may not add, due to rounding and set-offs.
Guidance and non-GAAP financial measures
Guidance
The company only provides guidance on a non-GAAP basis. We do not provide a reconciliation of forward-looking adjusted EBITDA (non-GAAP) to GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts necessary for such a reconciliation, in particular because special items, such as restructuring, litigation and other matters, used to calculate projected net income (loss) vary dramatically based on actual events, the company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amount of these deductions may be material and, therefore, could result in projected GAAP net income (loss) being materially less than projected adjusted EBITDA (non-GAAP). Our guidance speaks only as of the date hereof. We undertake no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect actual outcomes, unless required by law.
Non-GAAP financial measures
We disclose in this presentation non-IFRS financial measures titled: adjusted operating income, adjusted net income attributable to the company's shareholders, adjusted EBITDA, adjusted EPS, segment EBITDA, segment EBITDA margin and free cash flow. Our management uses such non-GAAP measures to facilitate operating performance comparisons from period to period and presents free cash flow to facilitate a review of our cash flows. We calculate our adjusted operating income by adjusting our operating income to add certain items, as set forth in the reconciliation table "Adjustments to reported operating and net income." Certain of these items may recur. We calculate our adjusted net income attributable to the company's shareholders by adjusting our adjusted operating income, net income attributable to the company's shareholders to add certain items, as set forth in the reconciliation table "Adjustments to reported operating and net income (Non-GAAP)" in our quarterly earnings release, excluding the total tax impact of such adjustments. We calculate our adjusted EBITDA by adding depreciation and amortization back to adjusted operating income. Adjusted EPS is calculated as adjusted net income divided by weighted-average diluted number of ordinary shares outstanding as provided in the reconciliation table under "Calculation of adjusted EPS." We calculate our segment EBITDA by adding back to our segment profit the depreciation and amortization for each segment. We calculate our segment EBITDA margin by dividing segment EBITDA by revenue. We calculate our free cash flow as our cash flows from operating activities net of our purchase of property, plant, equipment and intangible assets, and adding proceeds from the sale of property, plant and equipment, and dividends from equity-accounted investees during such period as presented in the reconciliation table under "Calculation of free cash flow." You should not view adjusted operating income, adjusted net income attributable to the company's shareholders, adjusted EPS or adjusted EBITDA as a substitute for operating income or net income attributable to the company's shareholders determined in accordance with IFRS, adjusted EPS as a substitute for EPS, or free cash flow as a substitute for cash flows from operating activities and cash flows used in investing activities, and you should note that our definitions of adjusted operating income, adjusted net income attributable to the company's shareholders, adjusted EBITDA and free cash flow may differ from those used by other companies. However, we believe such non-GAAP measures provide useful information to both management and investors by excluding certain expenses management believes are not indicative of our ongoing operations. In particular, for free cash flow, we adjust our CAPEX to include any proceeds from the sale of property, plant and equipment because we believe such amounts offset the impact of our purchase of property, plant, equipment and intangible assets. We further adjust free cash flow to add dividends from equity-accounted investees because receipt of such dividends affects our residual cash flow. Free cash flow does not reflect adjustment for additional items that may impact our residual cash flow for discretionary expenditures, such as adjustments for charges relating to acquisitions, servicing debt obligations, changes in our deposit account balances that relate to our investing activities and other non-discretionary expenditures. Our management uses these non-IFRS measures to evaluate the company's business strategies and management's performance. We believe these non-IFRS measures provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency of key measures used to evaluate our performance. We present a discussion in the period-to-period comparisons of the primary drivers of changes in the company's results of operations. This discussion is based, in part, on management's best estimates of the impact of the main trends in its businesses. We have based the preceding discussion on our financial statements. You should read the preceding discussion together with our financial statements.