Icl (ICL) Risk Factors

Pursuant to the Israeli Dead Sea Concession Law, 1961 (hereinafter – the Concession Law), as amended in 1986, and the concession deed attached as an addendum to the Concession Law, DSW was granted a concession to utilize the resources of the Dead Sea and to lease the land required for its plants in Sodom for a period ending on March 31, 2030, accompanied by a priority right to receive the concession after its expiration, should the Government decide to offer a new concession. There is no assurance that the Company will continue to hold the concession beyond that period. In accordance with section 24 (a) of the Supplement to the Concession Law, it is stated, among other things, that at the end of the concession period all the tangible assets at the concession area will be transferred to the government, in exchange of their amortized replacement value – the value of the assets as if they are purchased as new at the end of the concession period, less their technical depreciation based on their maintenance condition and the unique characteristics of the Dead Sea area. There is no certainty as to the manner of interpretation of the provisions of the Concession Law in this context as will be adopted in a legal proceeding, to the extent such proceeding would occur. For further information, see Note 18(b) to our Audited Financial Statements. We mine phosphate rock from phosphate deposits in the Negev desert in accordance with two mining concessions from the State of Israel, which are valid until the end of 2021. For further information on recent developments regarding the extension of the concessions for an additional period of three years, see Note 18(b) to our Audited Financial Statements. In addition, Rotem has two lease agreements in effect until 2024 and 2041 and an additional lease agreement of the Oron plant, which the Company has been working to extend since 2017, by exercising the extension option provided in the agreement. The Company is acting to renew the said concessions and leases, and believes that it is likely to occur since it is the only entity with appropriate production facilities; nevertheless, there is no certainty that these concessions and leases will be renewed under the same terms or at all. Failure to renew the said concessions and leases or different terms could materially and adversely affect our business, financial condition and results of operations. For further information on concessions, leases and permits, see Note 18(b) to the Company's Audited Financial Statements. Our existing phosphate mines in the Negev desert hold limited reserves of phosphate rock designated for phosphoric acid production. The Company is working to promote the plan for mining phosphates in Barir field, which is located in the southern part of the South Zohar deposit in the Negev Desert. There is no certainty regarding the timelines for the submission of the plan, its approval, or further developments with respect to the Barir field site. Failure to obtain such approval or a significant delay in receiving it or in finding alternative sources of phosphates in Israel, will have a significant negative impact on the Group's future mining reserves and our business, financial condition and results of operations will be adversely affected, even materially. For further information, see "Item 3 - Key Information- D. Risk Factors- Securing the future of the phosphate mining operations at Rotem Israel depends on obtaining several approvals and permits from the authorities in Israel", "Item 4 - Information on the Company- D. Property, Plant and Equipment- Mineral Extraction and Mining Operations - Negev", "Concessions and Mining Rights" and "Reserves", and Note 18(b) to our Audited Financial Statements.

A subsidiary in Spain (hereinafter – ICL Iberia) was granted mining rights based on legislation of Spain's Government from 1973 and the regulations accompanying this legislation. Further to the legislation, as stated, the Government of the Catalonia region published special mining regulations whereby ICL Iberia received individual licenses for each of the 126 different sites that are relevant to the current and possible future mining activities. Some of the licenses are valid up to 2037 and the rest are effective up to 2067. The concession for the "Reserva Catalana", an additional site wherein mining has not yet been commenced, expired in 2012. The Company is acting in cooperation with the Spanish Government to obtain a renewal of the concession. According to the Spanish authorities, the concession period is valid until a final decision is made regarding the renewal. Maintaining the mining activity in Spain also requires municipal and environmental licenses. If such licenses are not renewed, this would be expected to affect, possibly in a substantial manner, the mining activity at certain sites in Spain and the Company's financial results. For further information, see "Item 4 - Information on the Company- D. Property, Plant and Equipment- Mineral Extraction and Mining Operations" and "Concessions and Mining Rights" and "Reserves", and Note 18(b) to our Audited Financial Statements.

In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China, resulting in shutdowns of manufacturing and commerce in the months that followed. In March 2020, the World Health Organization declared COVID-19 a pandemic. Since then, the pandemic has continued to spread across the globe at varying infection rates and has introduced significant business and economic uncertainty and volatility to global markets. Accordingly, there has been, and may continue to be, a significant decline in global economic activity, including depressed commodity prices (including oil prices), in part, due to preventative ongoing measures taken by various governmental organizations around the world, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns. The spread of the COVID-19 pandemic during 2020 has led us to modify our business practices, including implementing policies, health and safety measures and procedures to protect our employees in all of our facilities and offices. We may need to take further actions as required by government authorities or that we determine are in the best interest of our employees, customers, partners and suppliers. For example, at the end of March 2020, our potash mining operations in Spain were temporarily halted for approximately three weeks and since then gradually ramped back up to normal capacity at the Suria site; Polysulphate mining activities in the UK were curtailed and gradually ramped back up to normal capacity; and some of our external contractors declared force majeure that led to a delay in few of our projects. There is no certainty that such measures will be sufficient to mitigate the risks posed by the pandemic. Furthermore, our ability to perform certain functions might be affected if we are required to take additional steps. The emergence of the COVID-19 pandemic had a negative impact on our business performance during 2020, as revenues decreased, mainly due to lower demand for some of our Industrial Products segment's products such as clear brine fluids, as a result of a significant decline in oil prices and demand, and such as certain flame retardants, due to lower activity in the automotive and electronics industries. In addition, our operating results were negatively impacted, mainly as a result of lower production in Europe and other operational costs related to the COVID-19 pandemic. We expect a continuing impact on our results also over the next few quarters, though the full future effect of the COVID-19 pandemic on the global economy and our business is uncertain, and it may be difficult to assess or predict. The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including, but not limited to: - The duration, severity and spread of the pandemic and the actions required by government authorities or other health organizations to contain the disease or treat its impact, including the effectiveness of the vaccinations developed and already administered in most countries. - The duration and severity of the sustained global recession, and the uncertainty as to when global economy will fully recover. - The possibility of additional outbreaks of the virus, or the development of more harmful and resistant variants of the virus, or any possible recurrence of other similar types of pandemics, or any other widespread public health emergencies. - Significant disruption of global financial markets and credit markets, which may reduce our ability to access capital or our customers' ability to pay us for past or future purchases, which could negatively affect our liquidity. - The possibility of temporary closures of our facilities or the facilities of our suppliers, customers, their contract manufacturers, and the possibility of certain industries shutting down. - Lower demand and/or pricing for our products and a potential global economic recession could lead to reduced demand in our end markets, particularly bromine compounds. In addition, the significant decline in crude oil prices and the oil markets' current ability to absorb excess supplies and rebalance inventory is likely to continue to result in decreased demand for our clear brine fluids. - The ability of our suppliers, contractors and third-party providers to meet their obligations to us at previously anticipated costs and timelines without significant disruption. - Our ability to continue to meet the manufacturing and supply arrangements with our customers at previously anticipated costs and timelines without significant disruption. - The ability to purchase raw materials that we use to produce our products, due to shortages resulting from supply chain disruptions, quarantines, lockdown orders and production shutdowns. We continue to closely monitor the effects and implications of the pandemic. The ultimate impact of the COVID-19 pandemic, or a similar health epidemic, is highly uncertain and subject to change. To the extent that the COVID-19 pandemic negatively impacts our business, results of operations, liquidity or financial condition, it may also have the effect of increasing many of the other risks described in this "Risk Factors" section.

The ICL Group is a multinational Company and its financial results are affected by global economic trends, changes in the terms of trade and financing and fluctuations of currency exchange rates. A crisis in the financial markets could cause a reduction in the international sources of credit available for the purpose of financing business operations. The impact of such a crisis might be expressed in terms of availability of credit to us and our customers, as well as the price of credit. In addition, the volatility and uncertainty in the European Union affect our activities in this market.

We develop and produce functional food ingredients and phosphate additives for the food industry. Selling ingredients and additives that will be used in products sold for human consumption involves inherent legal and other risks, including product contamination, spoilage, product tampering, allergens, or other adulteration. We could decide to, or be required to, recall products due to suspected or confirmed product contamination, adulteration, misbranding, tampering, or other deficiencies. Product recalls or market withdrawals could result in significant losses due to their costs, the destruction of product inventory, and lost sales due to the unavailability of the product for a period of time. Because food safety issues could be experienced at the source or by food suppliers or distributors, food safety could, in part, be out of our control. Regardless of the source or cause, any report of food-borne illness or other food safety issues such as food tampering or contamination of products that contain our ingredients or additives could adversely impact our reputation, hindering our ability to renew contracts on favorable terms or to obtain new business, and have a negative impact on our sales. Even instances of food-borne illness, food tampering or contamination of products that do not contain our ingredients or additives could result in negative publicity and could negatively impact our sales. We may also suffer losses if our products or operations violate applicable laws or regulations, or if our products cause injury, illness, or death. A significant product liability or other legal judgment or a related regulatory enforcement action against us, or a significant product recall, may materially and adversely affect our reputation and profitability. Awards of damages, settlement amounts and fees and expenses resulting from such claims and the public relations implications of any such claims could have an adverse effect on our business. The availability and price of insurance to cover claims for damages are subject to market forces that we do not control, and such insurance may not cover all the costs of such claims and would not cover damage to our reputation. Moreover, even if a product liability or fraud claim is unsuccessful, has no merit, or is not pursued, the negative publicity surrounding assertions against our products or processes could materially and adversely affect our business, financial condition and results of operations.

From time to time, we experience labor disputes, slowdowns and strikes. A significant portion of our employees are subject to collective labor agreements, mainly in Israel, China, Germany, United Kingdom, Spain and the Netherlands. Prolonged slowdowns or strikes at any of our plants could disrupt production and cause the non-delivery of products that had already been ordered. Also, ramp-up time is needed in order to return to full production capacity at the facilities. Furthermore, due to the mutual dependency between ICL plants, slowdowns or strikes in any one of ICL plant may affect the production capacity and/or production costs at another ICL plants. Labor disputes, slowdowns or strikes, as well as the renewal of collective labor agreements, may lead to significant costs and loss of profits, which could adversely, and even materially, affect our operating results and our ability to implement future operational changes for efficiency purposes. In the course of labor disputes, the workers union may impose certain sanctions which may include blocking or delaying the transfer of goods through the factory gates; such disputes may escalate into a strike.

In addition to seasonal and cyclical variations, the Company's businesses are exposed to fluctuations caused, in part, by factors on the supply side, such as entry into the market of new manufacturers and products, mergers of key players (producers\suppliers), expansion of the production capacity of existing manufacturers, and changes on the demand side, such as mergers or collaborations between key customers. Our competitors include some of the world's largest chemical and mining companies, some of which are state-owned or government-subsidized. The potential production capacity is currently greater than the global demand, which has affected price levels. In light of the fact that some of our products are commodities available from several sources, the primary competitive factor with respect to our products is the price. The prices of our products are influenced by the prices prevailing in the market, while the oversupply as compared to demand constitutes a negative factor in the field of commodity prices such as potash and phosphates, as do low prices in the agricultural sector. Additional competitive factors include product quality, customer service and technical assistance. If we are unable to compete effectively with these companies, our results of operations would almost certainly be significantly and adversely affected. Moreover, some of our products are marketed through distributors, mainly as pertains to the activity of the Phosphate Solutions segment and Specialty Fertilizers business. Any replacement of, or modification to the composition of our distributors might adversely affect the Company's competitive ability and cause a decrease in sales in certain markets, at least in the short term.

We use water, energy and various raw materials as inputs and we could be affected by higher costs or shortages in these materials, as well as by changes in transportation prices. For example, our phosphate facilities use large quantities of water purchased from Mekorot, Israel's national water company, at prices set by the government. If these prices rise significantly, our costs will rise as well. In our plants in Sodom, we obtain water from an independent system that is not part of the national water system. A shortage of water at the water sources in proximity to the plants or the imposition of additional costs/charges for water usage would force the Company to obtain water from sources located further away and/or at a higher cost. For information regarding the amendment to the Israeli Water Law in Israel and its impact on the Company's production costs at the Dead Sea, see Note 17 to our Audited Financial Statements. Our plants consume large amounts of energy. Moreover, energy is a significant component of the shipping costs of a considerable share of our products. Significant price increases for energy, or energy shortages, would affect shipping costs, production costs and/or quantities. The supply of electricity to our production processes and facilities in Israel is provided by our power station in Sodom and the national power grid. Our operations in Israel is dependent on these two sources, so significant malfunctions at the power station and/or interruption of power supply from the national grid in Israel may lead to additional financial liabilities and potential shutdowns at our production facilities, which could negatively affect ICL's ability to supply its products to both external customers and other ICL's sites using them as raw materials and reduce revenue from decreased production capacity. In addition, our magnesium plant requires a continuous supply of electricity, so any interruption in the power supply to the magnesium plant may cause a significant damage to our magnesium production process. The current supply of natural gas to our power plant and to our subsidiaries in Israel is dependent on a single supplier and on a single gas pipeline with limited transmission capacity. While our plants are prepared for the use of alternative energy sources (fuel oil and/or diesel fuel), an increase in our energy costs, or energy shortages, could adversely and materially affect our business, financial condition and results of operations. Furthermore, an increase in price or shortage of raw materials, inter alia: ammonia, sulphur, WPA and 4D (which we purchase from third parties) could adversely and materially affect our results of operations, financial position, and our business. We can provide no assurance that we will be able to pass on to our customers increased costs with respect to water, energy and our principal raw materials, as well as increases in transportation costs. Our inability to pass on such cost increases could adversely affect our margins. For further information, see "Item 4 - Information on the Company- B. Business Overview- Segment Information".

Securing the future of the phosphate mining operations at Rotem depends on obtaining several approvals and permits from the authorities in Israel, as follows: - Emission permit under the Israeli Clean Air Act (hereinafter - the Law): In 2018, the Company conducted two risk assessments by external experts regarding the possibility to execute all the clean air tasks required by the emission permit as per their approved timeline. The risk assessments focused on the technical and safety considerations arising from implementation of a large number of projects in parallel, in an industrial site. The assessments indicated that there is no operational feasibility to implement the full requirements of the permit within the defined timeline, and accordingly the Company is unable to meet the timeline set in the current permit. In 2019, following discussions with the Israeli Ministry of Environmental Protection (hereinafter - MoEP), the MoEP informed the Company that during the course of discussions to renew Rotem Israel's emission permit, which currently remains unchanged, they will consider the safety constraints, the complexity and multiplicity of projects, as well as the Company's diligence to comply with the present permit conditions and their schedules, while prioritizing projects with significant environmental impact. The Company provided the MoEP with its updated projects' outline, schedule and completion status. ICL Group Limited 24 In light of business uncertainty and the COVID-19 pandemic, the Company continued its discussions with the MoEP regarding the timing and scope of executing the investments, including the impact of the uncertainty surrounding Rotem Israel's activity, as far as the implementation of long-term projects is concerned. In December 2020, the Company submitted to the MoEP an application to update the current emission permit, including updated schedules for projects' execution in accordance with their environmental significance. In response, in December 2020, a summary letter was received from the MoEP regarding a principle outline that includes, among other things, postponing the execution of certain projects beyond the current permit period, which is to expire in September 2023, and a demand to complete certain projects within the permit period. The Company continues to hold discussions with the MoEP regarding prioritizing the projects' execution and reaching understandings within the framework of the current emission permit. - Mining concessions - The Company has the two mining concessions, which are in effect until the end of 2021. During the fourth quarter of 2020, as part of the Company's actions to extend the validity of the said mining concessions and obtain the necessary approvals, positive recommendations were received from the Ministry of Energy, the Committee for Reducing Concentration and the Competition Authority, to extend the licenses for an additional period of three years. In December 2020, the Minister of Energy approached the Chairman of the Finance Committee in the Knesset requesting that the Committee grant final approval to the said extension. - Oron's lease agreement - The Company has been working to extend the lease agreement for Oron's plant area since 2017, by exercising the extension option provided in the agreement. - Dry and wet phosphogypsum storage - in October 2020, the construction and use permit for pond 5 were extended until December 31, 2021. The Company is working with the relevant authorities to obtain all the required permits, for the continued operation of the gypsum ponds beyond 2021 and for the continued piling of gypsum, in accordance with the requirements set by law and/or instructions of the Planning and Building Committee. - Extension of oil shale extraction permit– The ERD (energy resource development) facility in Rotem Israel, which is used for extracting energy from oil shales (hereinafter – the facility), is essential for the continued production activity of Rotem Israel. In February 2020, the Ministry of Energy notified of its intention not to renew the oil shale extraction permit due to the environmental effects of the facility, whose operation is based on outdated technology. The Company is actively working in line with the Ministry of Energy's instructions to replace the facility with a natural gas steam boiler. As the replacement project is complex, and in light of the delays resulting from the Coronavirus crisis, the Company approached the Ministry of Energy with a request to extend the facility's production permit, from May 2021 until the end of 2022, so that the facility can be used until the completion of the project. - Finding economically feasible alternatives to the continued mining of phosphate rock in Israel – According to the Company's assessment of economic phosphate reserves in the existing mining areas, the estimated useful life of Rotem's phosphate rock reserves, which are essential for some production lines, is limited to only a few years. As described above, the Company is working to obtain permits and approvals which will provide an economic alternative for future mining of phosphate rock in Israel. ICL Group Limited 25 The Company is continuing its discussions with the relevant authorities, inter alia due to the COVID-19 pandemic and the business uncertainty, until the required approvals and permits are granted. Additionally, the Company increased its efforts to accelerate the discussions with the State of Israel on making decisions regarding future phosphate rock sources, in order to secure long-term certainty for Rotem Israel. The Company estimates that it is more likely than not that the said approvals, permits and future phosphate rock sources will be granted within a timeframe which will not materially impact the Company's results. Nevertheless, there is no certainty as to the receipt of such approvals, permits and future phosphate rock sources and/or the date of their receipt. Failure to obtain these approvals, permits and future phosphate rock resources, or a significant delay in receiving them can lead to a material impact on the Company's business, financial position and results of operations. As at December 31, 2020, Rotem employs more than 1,400 people, and the overall book value of its property, plant and equipment amounts to about $727 million.

We are required to comply with the U.S. Foreign Corrupt Practices Act (the "FCPA"), the UK Bribery Act and similar anti-corruption laws in other jurisdictions around the world, in the countries where we operate. We operate and sell in countries that may be considered as high risk in this regard. Compliance with these laws has been subject to increasing focus and activity by regulatory authorities, both in the United States and elsewhere, in recent years. Actions by our employees, as well as third party intermediaries acting on our behalf, in violation of such laws, whether carried out in the United States or elsewhere in connection with the conduct of our business, could expose us to significant liability for violations of the FCPA or other anti-corruption laws and accordingly may have a material adverse effect on our reputation and our business, financial condition and results of operations.

Any of the following may have a material adverse effect on our operating expenses, effective tax rate and overall business results: - Some government incentive programs may be discontinued, expire or be cancelled;- Governments may initiate new legislation or amend existing legislation in order to impose additional and/or increased fiscal liabilities on our business, such as additional royalties, natural resource taxes or required investments, as has occurred in Israel;- The applicable tax rates may increase;- We may no longer be able to meet the requirements for continuing to qualify for some incentive programs;- Such incentive programs and tax benefits may be unavailable at their current levels;- Upon the expiration of a particular benefit, we may not be eligible to participate in a new program or qualify for a new tax benefit that would offset the loss of the expiring tax benefit. - Changes in trade agreements between countries, such as in the trade agreements between the United States and China. - Changes in international taxation laws, as may be adopted by several countries we operate in, or sell to, may result in additional taxes or high tax rates being imposed on our operations.

As a mining and industrial chemicals Company, we are significantly affected by the legal provisions and licensing regime in the areas of environmental protection and safety. Recent years have been characterized by a substantial increase in the stringency and enforcement of legal provisions and regulatory requirements in these areas; the cost of adjustment to and compliance with such regulatory changes, including the technological complexity of such adjustment, as well as compliance with standardization, have all shown a significant upward trend. Legislative changes around the world may prohibit or restrict use of our products, due to environmental protection, health or safety considerations. Standards adopted in the future may affect us and change our methods of operation. Furthermore, some of our licenses, including business licenses and mining licenses, are for fixed periods and must be renewed from time to time. Renewal of such permits is not certain and may be made contingent on additional conditions and significant costs. Difficulties in obtaining such permits could have an adverse effect on our operations, business and results of operations. For example, in Israel, emission permits are received under the Israeli Clean Air Law. In order to comply with the emission permits received in connection with some of our operations in Israel, we are required to make significant capital investment over the next few years. For further information, see "Securing the future of the phosphate mining operations at Rotem Israel depends on obtaining several approvals and permits from the authorities in Israel" above,  "Item 4 – Information on the Company - B. Business Overview -Regulatory and Environmental, Health and Safety Matters" and "B. Business Overview -Business Licenses and Other Permits".