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K+S Aktiengesellschaft
Kepler Cheuvreux GCC 2018
Frankfurt, 15 January 2018
Thorsten Boeckers, CFOLutz Grüten, Head of Investor Relations
K+S Group
DisclaimerK+S Group
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.
2
K+S Group 3
ContentK+S Group
K+S Strategy Shaping 2030A
Current Trading and OutlookB
AppendixC
K+S Group
A strengths and weaknesses analysis
• High debt load and limited headroom• Mainly perceived as MOP and de-icing player;
full value of all portfolio components not realized• Improvement needs in ROCE & value creation
Financial challenges
Leading market position
Leader in salt, SOP, magnesium sulphates& premium fertilizers
In exploration, processing and project execution
Provenknow-how
High-margin industry and consumer products
New market development
We have strong capabilities... ...but need to improve further
Business challenges
• Engage with our environmental challengesin a proactive and sustainable way
• High dependency on weather and potash prices
• Disadvantaged cost position in potash production
• Slow product innovation
• Complex organization and "silos"• Limited value-added of central functions• Untapped synergy potential
Structural challenges
4
K+S Group
K+S Group 5
A fresh perspective on our existing portfolioK+S Group
Key financials 2016
Production focus
Potash Salt
+
Customerfocus
139
1,285
Revenue EBITDA
EBITDARevenue
2331,135
81
Revenue EBITDA
572
EBITDA
465 84
Revenue
1
2
4
3
• MOP• Premium Fertilizers• Fertigation
• Chemical• Pharma• Ind. Specialties• Food Processing
(€m)
Revenue share
37%
33%
EBITDA-Margin
11%
21%
Revenue share
EBITDA-Margin
Agriculture
Industry
• De-Icing17% 14%
Revenue share
EBITDA-Margin
Communities
• Consumers13% 18%
Revenue share
EBITDA-MarginConsumers
K+S Group
Agriculture: Our specialties serving growing markets
Agriculture
Fertigation
PremiumFertilizers
MOP
Fertigation (injection of fertilizers into an irrigation system)
• Potassium chloride• Application for tomatoes, chloride compatible crops
• Potassium sulphate• Application e.g. for fruits, vegetables
• Magnesium sulphate• Suitable for high-sulphur demanded crops, e.g. oil plants
Premium Fertilizers
• Chloride free potash fertilizer for chloride sensitive crops• Application crops: fruit, vegetables, potatoes, wine
• Combined potash and magnesium fertilizer• Application for e.g. cereals, rapeseed oil, palm oil, soy
• Fertilizer with high content of magnesium and sulphur• Application for chloride sensitive crops, e.g. fruits,
MOP = 60er Kali
• Concentrated single-nutrient fertilizer containing 60% K₂O• Application e.g. for cereals, oilseed rape, oil palm, soy
3%
49%
48%
€1.3bn
K+S Group
¹) Derived from FY 2016 revenues
6
¹)
K+S Group 7
Industry: Specialties can be used for various purposes
Industry
Salt Specialties
Electrolysis
Food Processing
Potash Specialties
Pharma
Animal Hygiene
Others
Salt specialtiesE.g. used for water softening, animal nutrition or ABS plastics
ElectrolysisKCL 99 is well suited for chloralkali electrolysis and used in the production of potassium hydroxide
Food ProcessingE.g. extracting carrageenans from red algae thatare used for thickening of products manufactured by the cosmetics and food industry
Potash specialtiesE.g. used for drilling or inthe manufacturing of dyes and pigments
PharmaE.g. homeopathic medicinal preparations of mineral salts
Animal HygieneUsed to granulate the animal hygiene product CATSAN®
OthersContains parts of Complementary Activities such as waste management
¹) Derived from FY 2016 revenues
€1.1bn
K+S Group
¹)
K+S Group 8
Consumers: Our strong brands and applications
Consumers
Other
Dishwasher
Pool Salt
Ice Melt
Table Salt
Water Softening
Table Salt can be used for cooking and baking, as well as for seasoning at the table.
The principle of water softening is a removal of the hardness components calcium and magnesium from the water by the ion exchange method.
Ice Melt is sold as consumer productsfrom Morton Salt in the U.S.
Dishwasher salt is filled into the container of a dishwasher, so that the ion exchanger of the machine can soften the water. This increases the cleaning efficiency.
Pool Salt is used for chlorination in public swimming pools and wellness facilities to disinfect the water and to prepare pool brines
€0.5bn
K+S Group
¹) Derived from FY 2016 revenues
¹)
K+S Group 9
We will implement our new strategy in two phases
Phase 2: Growth
203020202017
Phase 1: Transformation
Realize synergies
Advance corporate culture
Net debt/ halvedEBITDA vs. H1/2017
Synergies >€150m
EBITDA-Ambition €3bn
ROCE >15%
Revenue growthbeyond 2030
>4%
Increased share of specialties
Tapping the full potential of our existing assets
Exploring new adjacent growth areas
Shaping the organizationand focusing towards our clients
Reduce indebtedness
Investment grade ratingachieved in 2023
K+S Group
K+S Group
Phase 1:We will transform ourselves andcreate a solid financial base
10
Strengthen financial base
Supply chain and logistics
Operations: Digital mining
G&A optimization
Operations: Lean management
Sales excellence
Procurement
Evaluate tailing piles optimization
Reduce indebtedness
Realize Synergies
> € 150mp.a. run rate
after inflationby 2020 YE
Shaping the organization
Build ‘One Company’• Commit to existing portfolio• Break up silos and create the
foundation to generate synergies
Customer first: Lift our potential• Focus on Product Market Segments
Agriculture, Industry, Communities and Consumers to better penetrate high-margin, non-commodity business
Increase financial transparency• Make performance transparent
along new Product Market Segments
K+S Group
K+S Group
What we’ve done – what our next steps are
We will keep you posted with updates on our Strategy in H1/2018 on a CMD
11
K+S Group
Update on Shaping 2030
Preparing to decide on new organization and reporting lines
Start of bottom-up validation of synergies (>150 Mio. € by 2020)
Setting up project management
!
!
On
goin
g ta
sks
Nex
t to
co
me
Management remuneration (LTI) linked to share price performance!
Bottom-up validation of synergies
!
Project to lift synergies starting
!
!
!
Final concept about future organization incl. KPIs
Sustainability targets and KPIs defined. Possible use of solid residues clarified
!
!
First concept about future organization and KPIs
Board of Executive Directors streamlined!
K+S Group
Board of Executive Directors
12
Dr. Burkhard LohrCEO
Thorsten BoeckersCFO
Mark RobertsCOO
Dr. Thomas NöckerPersonnel Director
K+S Group
K+S Group 13
ContentK+S Group
K+S Strategy Shaping 2030A
Current Trading and OutlookB
AppendixC
K+S Group
New approach to environmental challenges works
1) Kainite Crystallization and Flotation Facility 14
Higher regional court dismisses complaint brought by prosecutor’s office - water pollution accusations baseless
K+S aims for an agreement with the Federation for Environment and Nature Conservation Germany (BUND)
Thuringian municipality of Gerstungen and K+S want to end their long-standing dispute
Disputes and litigationhandled proactively
Deep-well injection permit granted until 2021 (1.5m m3)
Implementation of measures to limit outage days
Construction of KCF 1) well on track (reduction of saline wastewater by 1.5m m3 to 5.5m m3)
K+S mandated advisor K-UTEC to carry out a concept for extracting further products from saline wastewater and to reduce occurrence of such
Expansion of tailings pile capacity Hattorf (Werra): Approval for ‘early commencement’ granted
Efforts to improve our environmental standards
!
!
!
!
!
!
!
!
K+S Group
License to operate secured
K+S Group 15
Q4 trading update
• Bethune: Production of ~500kt tons in 2017 achieved
• Latest pricing environment remains supportive
• No outage days in Germany
• Decision to close Sigmundshall at the end of 2018 is burdening FY 2017 results as guided
• On track with previously communicated FY guidance
K+S Group
K+S Group 16
ContentK+S Group
K+S Strategy Shaping 2030A
Current Trading and OutlookB
AppendixC
K+S Group
Q3/17 – considerable improvementK+S Group
No outage days at Werra plant in Q3
EBITDA up from €56m to €77m (+37%)
FCF further improved (+47%)
Challenges: slower ramp-up at Bethune, SOP pricing and hurricane Irma
-31
1232 17
4 10
Q3/
16
Vo
lum
e/M
ix
Pri
ce FX
Oth
er
eff
ects
Q3/
17
Highlights Financials
€ million Q3/16 Q3/17 YoY
Revenues 688 727 +6%
t/o Potash 302 358 +19%
t/o Salt 346 329 -5%
EBITDA 56 77 +37%
D&A -87 -64 -
EBIT I -31 12 -
t/o Potash -49 2 -
t/o Salt 18 17 -9%
Adjusted net profit -27 2 -
Adjusted EPS (€) -0,14 0,01 -
9M/16 9M/17 YoY
Operating cash flow 390 382 -2%
Adj. free cash flow -456 -241 +47%
CapEx 904 568 -37%
17
EBIT I in €m
-
K+S Group
2019e2017e 2018eActual2016
2020e
We aim for a positive free cash flow in 2019
18
Massive positive swing in free cash flow
Free cash flow bridge approximation 2016-2020Based on current portfolio – inorganic growth not included
Fully invested in best class assets
like Bethune
Phase 2: GrowthPhase 1: Transformation
Ambition
2030
EBITDA
ROCE
€3bn
>15%
+ CapEx+ Werra+ Bethune- FX- WC
Investment grade rating achieved in 2023
K+S Group
K+S Group 19
Phase 2:We identified ample growth opportunities in our Product Market Segments starting from 2020
13%
33%
37%
17%
2016
10%
10%
45%
35%
2030
Growth initiatives from 2020
• Tapping the potential of existing assets and expansion options
• Expand offering of specialty fertilizers
• Develop strong position in fertigation
• Develop advanced business models (e.g. agro-platform in Africa)
• Leverage branding capabilities in consumer salt• Grow into Asia
Communities
Consumers
Agriculture
Industry
8%
9%
6%
4%
7%
• Strengthen portfolio of specialty industrial products
• Expand offering for the pharma industry
• Grow into Asia
• Strengthen position in existing markets
~€11bn
€3.5bn
2019
43%
12%
28%
17%
Revenue shares and CAGR 2016-2019-2030
2%Inorganic
5%Organic
K+S Group
K+S Group
1,00
1,05
1,10
1,15
1,20
1,25
Currency Management
20
K+S Group
Hedging of transaction risks, basis USD budget net position
Cash flow view: most of anticipated net position hedged
Hedging is used if an underlying transaction exists or is expected with great probability
2017/2018
EUR
/USD
Anticipated average exchange rate (full year 2017): 1.12 EUR/USD (incl. premium)
Worst Case
Best Case
Planned EUR/USD rateLimitation of risk
Limitation of chance
1.25
1.20
1.15
1.10
1.05
1.00
K+S Group
K+S GroupGuidance: Housekeeping items
21
FY 2016 Guidance pre Q3 FY 2017ePotash and Magnesium Products
Global sales volumes 1) ~ 66m tons slight increase slight increase
K+S sales volumes 6.1m tons 6.8-7.2m tons 6.8-7.0m tons
Average selling price (per ton) € 253 slight increase slight increase
Salt
K+S sales volumes 19m tons moderate increase moderate increase
t/o de-icing 10m tons moderate increase moderate increase
Group
Revenues € 3.5bn € 3.60bn – 3.80bn € 3.60bn – 3.80bn
EBITDA € 519m € 560m – 660m € 560m – 660m
EBIT I € 229m € 260m – 360m € 260m – 360m
Financial result € -52m significant improvement ~€-60m to -70m
CapEx € 1.2bn significantly lower up to €900m
Average fx-rate (EUR/USD) 1.11 1.12 1.13
Tax rate 26-28% ~26-28% ~26-28% ²)
Reconciliation (EBIT I) -30m ~€-40m – 50m ~€-40m – 50m
Production Outage Days (Werra)
~200 days ~55 days ~25 days
¹Incl. ̴ 4mt of potassium sulphate and potash grades with lower mineral content²Excluding any impact from US tax reform
K+S Group
Financial CalendarK+S Group
Commerzbank German Investment Seminar 8-10 January 2018
Oddo BHF Forum 2018 12 January 2018
Kepler Cheuvreux German Corporate Conference 15 January 2018
Annual Report 15 March 2018
Analyst Conference in Frankfurt (save-the-date) 15 March 2018
22
K+S Group
IR Contact DetailsK+S Group
E-mail: [email protected]: www.k-plus-s.comIR-website: www.k-plus-s.com/ir
K+S AktiengesellschaftBertha-von-Suttner-Str. 734131 Kassel (Germany)
Laura SchumberaJunior Investor Relations Manager
Phone: +49 561 / 9301-1607Fax: +49 561 / [email protected]
Lutz GrütenHead of Investor Relations
Phone: +49 561 / 9301-1460Fax: +49 561 / [email protected]
Katharina VolkmarRoadshow Management
Phone: +49 561 / 9301-1100Fax: +49 561 / [email protected]
Martin HeistermannSenior Investor Relations Manager
Phone: +49 561 / 9301-1403Fax: +49 561 / [email protected]
Alexander EngeInvestor Relations Manager
Phone: +49 561 / 9301-1885Fax: +49 561 / [email protected]
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