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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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
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
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
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
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
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
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
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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