Kepler Cheuvreux GCC 2019 - Frankfurt, 21 January 2019 Dr Burkhard Lohr, Chief Executive Officer Lutz Grüten, Head of Investor Relations Julia ...

 
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Kepler Cheuvreux GCC 2019 - Frankfurt, 21 January 2019 Dr Burkhard Lohr, Chief Executive Officer Lutz Grüten, Head of Investor Relations Julia ...
K+S Group

Kepler Cheuvreux GCC 2019

  Frankfurt, 21 January 2019
  Dr Burkhard Lohr, Chief Executive Officer
  Lutz Grüten, Head of Investor Relations
  Julia Bock, Senior Investor Relations Manager
Kepler Cheuvreux GCC 2019 - Frankfurt, 21 January 2019 Dr Burkhard Lohr, Chief Executive Officer Lutz Grüten, Head of Investor Relations Julia ...
K+S Group
Disclaimer

No reliance may be placed for any purpose whatsoever on the information or opinions contained in the Presentation or on its completeness, accuracy of fairness. No
representation or warranty, express or implied, is made or given by or on behalf of the Company or any of its respective directors, officers, employees, agents or
advisers as to the accuracy, completeness or fairness of the information or opinions contained in the Presentation and no responsibility or liability is accepted by any of
them for any such information or opinions. In particular, no representation or warranty, express or implied, is given as to the achievement or reasonableness of, and no
reliance should be placed on any projections, targets, ambitions, estimates or forecasts contained in this Presentation and nothing in this Presentation is or should be
relied on as a promise or representation as to the future.

This Presentation contains facts and forecasts that relate to the future development of the K+S Group and its companies. The forecasts are estimates that we have made
on the basis of all the information available to us at this moment in time. Should the assumptions underlying these forecasts prove not to be correct or should certain
risks – such as those referred to in the Annual Report – materialise, actual developments and events may deviate from current expectations. Given these risks,
uncertainties and other factors, recipients of this document are cautioned not to place undue reliance on these forecasts.

This Presentation is subject to change. In particular, certain financial results presented herein are unaudited, and may still be undergoing review by the Company’s
accountants. The Company may not notify you of changes and disclaims any obligation to update or revise any statements, in particular forward-looking statements, to
reflect future events or developments, save for the making of such disclosures as are required by the provisions of statue. Thus statements contained in this
Presentation should not be unduly relied upon and past events or performance should not be taken as a guarantee or indication of future events or performance.

This Presentation has been prepared for information purposes only. It does not constitute an offer, an invitation or a recommendation to purchase or sell securities
issued by K+S Aktiengesellschaft or any company of the K+S Group in any jurisdiction.

                                                                                                                                                         K+S Group            1
Kepler Cheuvreux GCC 2019 - Frankfurt, 21 January 2019 Dr Burkhard Lohr, Chief Executive Officer Lutz Grüten, Head of Investor Relations Julia ...
Current Trading
Kepler Cheuvreux GCC 2019 - Frankfurt, 21 January 2019 Dr Burkhard Lohr, Chief Executive Officer Lutz Grüten, Head of Investor Relations Julia ...
K+S Group
       Potash Market update

                                                  Pricing (Source: FMB)

                          140%                        MOP Brazil
                          130%                                                    MOP Europe
                          120%

                          110%

                          100%
                                     SOP Europe
                           90%

                           80%
                             Q1/17   Q2/17   Q3/17     Q4/17     Q1/18    Q2/18     Q3/18   Q4/18

 Strong demand holds across all regions
 Many producers are sold out
 Recovery of MOP prices continued
 Global demand 2018 again slightly up to ~72m tons KCl
But:
 European MOP and Specialty prices are lagging behind
                                                                                                    K+S Group   3
Kepler Cheuvreux GCC 2019 - Frankfurt, 21 January 2019 Dr Burkhard Lohr, Chief Executive Officer Lutz Grüten, Head of Investor Relations Julia ...
K+S Group
        Salt Market update

                                              Pricing trends in de-icing

 De-icing
       Mixed picture in our winter regions
       Promising pre-stocking in US Mid-West
       Highly competitive US East Coast
       Dec below average in terms of snow events
 Non de-icing
     Solid demand
 Logistics costs inflation to continue in 2019
                                                                           K+S Group   4
Kepler Cheuvreux GCC 2019 - Frankfurt, 21 January 2019 Dr Burkhard Lohr, Chief Executive Officer Lutz Grüten, Head of Investor Relations Julia ...
K+S Group
       Extreme weather situation in Germany - implications

             Rainfall comparison (Werra)                     Impact on K+S
  In l/m2                                                      Long-lasting severe drought in 2018 led to temporary
100
                                                                shutdowns in Q3 and Q4
                                                               EBITDA impact for each site is up to € 1.5 million per day
                                                                -> € ~ 110 million in 2018
                                                               Basin capacities have been increased by
                                         5yr Average
                                                                > 10% to 600,000 cubic meters
 50                                                            Water levels were low!
                                                                    High logistics costs for remote disposal (old mines)
                                                                    Inland shipping was also impacted
                                                                    2018: 64 days of weather related plant shut downs !
                                                               In 2019, significantly higher storage capacity available
  0
                                                               Q1 2019 now secured due to heavy rainfalls in Dec
                            Aug

                                   Sep

                                         Oct

                                               Nov

                                                       Dec
       May

             Jun

                    Jul

                            2018                                -> basin levels significantly lowered

  Source: Wetterkontor.de
                                                                                                                       K+S Group   5
Kepler Cheuvreux GCC 2019 - Frankfurt, 21 January 2019 Dr Burkhard Lohr, Chief Executive Officer Lutz Grüten, Head of Investor Relations Julia ...
Shaping 2030 Strategy
Kepler Cheuvreux GCC 2019 - Frankfurt, 21 January 2019 Dr Burkhard Lohr, Chief Executive Officer Lutz Grüten, Head of Investor Relations Julia ...
K+S Group
Our vision for 2030

We will be the most customer-focused,   'One Company'
independent minerals company and grow   ... thinking and acting as 'One Company' and
our EBITDA to €3bn in 2030 by ...       realizing synergies between our businesses

                                        Tapping the full potential of our
                                        existing assets
                                        ... and establish the most value-creating portfolio
                                        combination

                                        Exploring new adjacent growth areas
     Agriculture   Industry             ... pursuing growth by venturing into new markets
                                        where we can use our existing capabilities
    Communities    Consumers

                                        Increasing the share of our specialties
                                        business
                                        ... to ensure an overall stabilized performance and
                                        reduce our dependency on standard products and
                                        weather

                                                                                K+S Group     7
Kepler Cheuvreux GCC 2019 - Frankfurt, 21 January 2019 Dr Burkhard Lohr, Chief Executive Officer Lutz Grüten, Head of Investor Relations Julia ...
K+S Group
 We will implement our strategy in two phases

        Phase 1: Transformation                                       Phase 2: Growth

2017                                        2020                                                          2030
        Reduce indebtedness                                    Tapping the full potential of our
                                                               existing assets

        Realize synergies                                      Exploring new adjacent growth areas

         Advance corporate culture                             Increased share of specialties

         Shaping the organization
         and focusing towards our clients

        Net debt/        halved             Investment grade rating           EBITDA-Ambition      €3bn
        EBITDA          vs. H1/2017         achieved in 2023
                                                                              ROCE              > 15%
        Synergies      > €150m                                                Revenue growth
                                                                                                   > 4%
                                                                              beyond 2030

                                                                                                   K+S Group   8
Kepler Cheuvreux GCC 2019 - Frankfurt, 21 January 2019 Dr Burkhard Lohr, Chief Executive Officer Lutz Grüten, Head of Investor Relations Julia ...
Phase I
K+S Group
Phase I: Building a basis for our growth options

Divisional Silos                                        Matrix
                                                                                        Board of Executive Directors
                                                                                                       Matrix
                                                                    COO Group                        CEO Group                          CFO Group

    Board of Executive Directors                             Head of Human           Head of Corporate      Head of Corporate      Head of Corporate
                                                               Resources               Development             Controlling         Communications

                                                                                                                        CEO Europe &
                                                                                 CEO Americas
                                                                                                                         Agriculture
                                          Agriculture   Industry

                                         Communities    Consumers

                                                                                                 Head of Marketing,
                                                                                                Sales & Supply Chain
                                                                                                                                   Agriculture
                                                                                                     Excellence
                                                                                                                                       Industries
                                    Customer                                                      Marketing & Sales
                                    Segments                                                        Committee                      Consumers
                                                                                                                                Communities

                                                                                                Head of Operations
                                   Operations                                                      Excellence

                                                                                                Operations Excellence
                                                                                                    Committee

                                                                    Operating Unit        Function        Executive Committee

                                                                                                                                       K+S Group    10
K+S Group
Synergies: Breakdown by program

 SHAPING
 2030                                         Sponsor     Net synergies YE 2020
                                                          (vs. 2017)

                 SG&A Optimization            CEO          ~ €30m

                 Operations                   COO          > €50m

     Lift        Procurement                  CFO          > €30m
     synergies
                 Supply Chain and Logistics   COO          > €20m

                 Commercial Excellence        COO          > €20m

                                                        ∑ > €150m

                                                                  K+S Group   11
K+S Group
Shaping 2030 EBITDA impact

                               Costs   Synergies           > €150m

      2018e                    2019e                    2020e

         Total costs for synergy program: ~ €150m (2020 year end)

                                                                     K+S Group   12
K+S Group
              Net Present Value (NPV) Bethune (1)

              We have updated our valuation for Bethune

               Current purchase conditions for gas reflected
               Modified ramp-up curve taken into consideration
Assumptions

               WACC (before taxes) = 8.5%
               USD/EUR = 1.15
               EUR/CAD = 1.55

               View on the 2019 - 2070 period
               MOP gran. Brazil: 2019 - 23 = 330-370 USD/t

                                                                  K+S Group   13
K+S Group
                 Net Present Value (NPV) Bethune (2)

                 NPV for Bethune                          EUR 4.8 bn

                 This NPV equals an EV per share of 25 EUR
Sensitivities

                                            Variation             NPV change

                 MOP gran. Brazil          +/- 10 USD/t          +/- €200 million

                “We create value for our stakeholders!”

                                                                                    K+S Group   14
K+S Group
         Site costs (FOB) in comparison (2020)

       USD/t
                                                                             -30%

Best-in-class

                                                                                                                                    *
                                                             K+S Bethune     K+S Zielitz   K+S Bethune           BU Potash
                                                              (in 2023)    (Purely MOP)                         w/o Bethune
                                                                                                              (incl. Specialties)

                                                                                                                * column width =
                Source: CRU Report 2016, K+S                                                   production capability in million tons

                                The Bethune ramp-up to 2.86 million tons in 2023 (production capability)
                                          significantly improves K+S's competitive position.

                                                                                                                  K+S Group             15
Phase II
K+S Group
       Our strategy has incorporated important megatrends

     8.5bn                                0.2                                 Arable land shrinking
Global population in 2030      Average global warming (ºC)

                                                                              Yield needs to be improved

      Today: 7.3bn                       Per decade                           Higher efficiency of fertilization
                                                                               and irrigation needed

       Implications for K+S                                                   Plants have to be more stress
                                                                               resistent

                                                                              Infrastructure needs to be
                            40%                          5.4bn                 improved  focus on
                  of population suffer from           people belong to the     renewable energy
                   water shortage by 2030             middle-class by 2030

                                                                              Growing population, especially
                                                                               in Asia, needs more salt for
                     70% of water used                    2015: 3.0bn          various purposes
                       for agriculture

                                                                                                       K+S Group    17
K+S Group
Growth areas and ideas cover the full growth landscape

 K+S Growth Landscape

    Geo-expansion                         Fertilizer                           Industry

         Africa                   Increase of fertilizer specialties   Expand Pharma & Food portfolio

         Asia                     Ramp of low cost commodities              Chemical applications

 Growth areas and ideas cover core and adjacent businesses

                                                                                         K+S Group      18
Financials
K+S Group
P&L

€ million              FY/16   Q1/17   Q2/17   Q3/17   Q4/17   FY/17   Q1/18   Q2/18    Q3/18
Revenues               3,457   1,126     742     723   1,032   3,627   1,170     812        840
EBITDA                   519     211     102      77     187     577     237     105         36
  Margin                 15%     19%     14%     11%     18%     16%     20%     13%         4%
EBIT I                   229     137      29      12      93     271     147      13        -58
Financial result         -52      -9      -4      -9      -5     -26     -31     -25        -26
Net income, adjusted     131      95      19       2      30     145      84       -9       -61
EPS, adjusted           0.68    0.49    0.10    0.01    0.16    0.76    0.44    -0.05     -0.32

                                                                                        K+S Group   20
K+S Group
  Cash Flow and Balance Sheet

€ million                             FY/16    Q1/17    H1/17    9M/17    FY/17    Q1/18    H1/18    9M/18
Operating cash flow                     445      267      384      383      307      233      292      276
- Investing cash flow
                                      -1,222     -212     -410     -623    -697       -90     -198     -336
 (pre sale/ purchase of securities)

Adjusted free cash flow                -777       55       -26     -241    -390      143       94       -60
CapEx                                 1,171      277      410      568      811       63      154      278

Net debt                              3,584     3,614    3,745    3,939   4,141     4,009    4,129    4,299
t/o Net financial debt                2,401     2,440    2,592    2,780   2,974     2,834    2,944    3,100
Net debt/ EBITDA (LTM)                   6.9      8.1      8.1      8.1      7.2      6.7      6.8      7.6
Equity ratio                            47%      48%      45%      44%      43%      42%      43%      41%

                                                                                                      K+S Group   21
K+S Group
   Guidance 2018: EBITDA between € 570 – 630m

                                                                                    Underlying assumptions:
                                                                                     Tax rate:                   ~26-28%
  € million                                                                          Financial result:           ~-120 million EUR
                                                                                     CapEx:                      ~ 500 million EUR
                                                                                     D&A (incl. Bethune):        380 to 400 million EUR
                                                                                     Reconciliation (EBITDA):    ~-70 million EUR

                                       Main effects:
                                       + Bethune                          Main effects:
                                       + Tangibly higher salt             - Planning
                                         volumes                            assumption:
                                       - Production issues                  1.20 EUR/USD                             € 570 – 630m
        577                              Germany
                                                                                               Main effects:
                     Main effects:                                                             +/- Sigmundshall
                     + Potash prices                                                           - Production
                     + De-icing salt                                                               issues
                       prices                                                                  - Logistic costs
                                                                                               - Shaping 2030

     Actual             Price          Volume/Mix               Drought    Currency                 Other                   2018e
      2017                                                       Effect                            Effects
                                                                                                    (net)

Full year guidance is including weather-related outage days in Q4 (roughly €10m)!

              Cash unit cost per ton (2017: 214€/t) likely to be at ~ 215 €/t in 2018
                                                                                                                            K+S Group      22
K+S Group
     Expected Development of our Potash Production

                              >500kt                  +300 to              +100kt
                        Werra: no lack of staff and                                KCF
      2018              50% broken machinery back
                        Werra: no outage days
                                                       500kt                                     2019
                                                        Bethune
                        Neuhof: roof stability
 ~ 6.2mt Germany       improved                                                          6.1 – 6.2mt Germany
  (incl. outage days)
                                                                                          1.7 – 1.9mt Bethune
 ~ 1.4mt Bethune                                                                         0.1mt Huludao
 0.1mt Huludao
Total: ~ 7.7mt                     Change in Production                                  Total: 7.9 – 8.2mt

   Sales Volume:                                                                           Cash Unit Cost:
      ~7.5mt                                                                                  > € 200
                                        -600kt                -100kt                     due to overall cost inflation
                                         Sigmundshall       Lower K2O content in
                                                                 Germany

              High-cost production to be replaced by low-cost volumes from Bethune

                                                                                                   K+S Group   23
K+S Group
CapEx development 2015-2020

in m€
1.200                                  BU Potash (ex Bethune)
                                       Bethune
                                       BU Salt
1.000
                                       Complementary Activities

 800

 600

 400

 200

   0
        2015   2016    2017   2018e   2019e             2020e

                                                                  K+S Group   24
K+S Group
Moving parts Free Cash Flow 2017-2020

                         + Bethune
                         + Price
                         – Werra
                         – FX                   Significant
                                                                                     + Bethune
                                              improvement
                                                                                     + Volume
  -390                                                                               = Price
                                                                                     = FX
                                                                                     – Net Working Capital
   2017

                                      CapEx

                                                                                               CapEx
            Operations

                                                              Operations
                                                   2018e

                                                                                                               2020e
                            Shaping

                                                                           Shaping
                                                                                                             K+S Group   25
K+S sustainability KPIs and
targets 2030
K+S Group
         K+S sustainability KPIs and targets 2030 - People

                                                                                   Target until 2030 at
         Goal              KPI
                                                                                        the latest

                                                                                            0
         Health & Safety   Lost time incident rate (LTIR)
                                                                                        Vision 2030
PEOPLE

         Diversity &       Employees’ favorable perception of inclusive work
                                                                                           >90
         Inclusion         environment (percent)

                           Sites covered by a human rights due diligence process
         Human Rights                                                                      100
                           (percent)

                                                                                                K+S Group   27
K+S Group
              K+S sustainability KPIs and targets 2030 - Environment

              Goal               KPI                                                         Target until 2030 at
                                                                                                  the latest
                                 Deep well injection of saline waste water in Germany
                                                                                              0   Starting January 2022
                                 (m³ p.a.)
              Water
                                 Additional reduction of saline process water from             -500,000 Excluding
                                                                                           reduction by KCF facility and end
                                 potash production in Germany (m³ p.a.)                            of production SI
ENVIRONMENT

                                 Amount of residue used for other purposes than tailings
                                 or increased amount of raw material yield (million                       3
              Waste              tonnes p.a.)

                                 Additional area of tailings piles covered (ha)                         155

                                 Carbon footprint for power consumed (kg CO2/MWh)
                                                                                                         -20
                                 (percent)
              Energy & Climate
                                 Specific greenhouse gas emissions (CO2) in logistics
                                                                                                         -10
                                 (percent)

                                                                                                              K+S Group    28
K+S Group
                  K+S sustainability KPIs and targets 2030 - Business ethics

                                                                                                Target until 2030 at
                  Goal                 KPI
                                                                                                     the latest

                                       Critical suppliers aligned with the K+S Group Supplier           100
                  Sustainable Supply   Code of Conduct (SCOC) (percent)                             by end of 2025
BUSINESS ETHICS

                  Chains
                                                                                                        > 90
                                       Spend coverage of the K+S Group SCoC (percent)
                                                                                                    by end of 2025

                                       All employees reached by communication measures
                  Compliance & Anti-                                                                    100
                                       and trained appropriately in compliance matters
                  Corruption                                                                        by end of 2019
                                       (percent)

                                                                                                            K+S Group   29
K+S Group
 IR Contact Details

                                                                           K+S Aktiengesellschaft
                                                                           Bertha-von-Suttner-Str. 7
                                                                           34131 Kassel (Germany)

                                                                           E-mail:          investor-relations@k-plus-s.com
                                                                           Homepage:        www.k-plus-s.com
                                                                           IR-website:      www.k-plus-s.com/ir
Lutz Grüten                         Christiane Martel
Head of Investor Relations          Roadshow Management
Phone: +49 561 / 9301-1460          Phone: +49 561 / 9301-1100
Fax: +49 561 / 9301-2425            Fax: +49 561 / 9301-2425
lutz.grueten@k-plus-s.com           christiane.martel@k-plus-s.com

Julia Bock, CFA                     Martin Heistermann                  Alexander Enge                   Laura Schumbera
Senior Investor Relations Manager   Senior Investor Relations Manager   Investor Relations Manager       Junior Investor Relations Manager
Phone: +49 561 / 9301-1009          Phone: +49 561 / 9301-1403          Phone: +49 561 / 9301-1885       Phone: +49 561 / 9301-1607
Fax:     +49 561 / 9301-2425        Fax:    +49 561 / 9301-2425         Fax:    +49 561 / 9301-2425      Fax:     +49 561 / 9301-2425
julia.bock@k-plus-s.com             martin.heistermann@k-plus-s.com     alexander.enge@k-plus-s.com      laura.schumbera@k-plus-s.com

                                                                                                                              K+S Group      30
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