ODDO BHF Forum Lyon, 10 January 2019 - Martin Heistermann, Senior Investor Relations Manager - K+S Group
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K+S Group ODDO BHF Forum Lyon, 10 January 2019 Martin Heistermann, 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
Current Trading
K+S Group
Market Update
Potash Pricing (Source: FMB)
Market
140% MOP Brazil
Strong demand holds across all regions
130% Many producers are sold out
MOP Europe
Potash
120% Recovery of MOP prices continued
110% But:
100% European MOP and Specialties prices are
90% SOP Europe lagging behind
80%
De-icing
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18
Mixed picture in our winter regions
Promising pre-stocking in US Mid-West
Highly competitive at US East Coast
Salt
Dec below average in terms of snow events
Non de-icing
Solid demand
Logistic costs inflation to continue in 2019
K+S Group 3
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
-> € ~ 100 million in 2018
Basin capacities have been increased by
5yr Average
> 10% to 600.000 cubic meters
50 Water levels were low!
High logistic costs for remote disposal (old mines)
Inland shipping was also impacted
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
-> basin levels significantly lowered
2018
Source: Wetterkontor.de
K+S Group 4
Shaping 2030 Strategy
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 6
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 7
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 9K+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 10K+S Group
Shaping 2030 EBITDA impact
Costs Synergies > €150m
2018e 2019e 2020e
Total costs for synergy program: ~ €150m (2020 year end)
K+S Group 11K+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 12K+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 13K+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 14Phase 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 16K+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 17Financials
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 19K+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 20K+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 21K+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 22K+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 23K+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 24K+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 26K+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 27K+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 28K+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
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