Kepler Cheuvreux GCC 2018 - Frankfurt, 15 January 2018 Thorsten Boeckers, CFO Lutz Grüten, Head of Investor Relations - K+S Group
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K+S Aktiengesellschaft Kepler Cheuvreux GCC 2018 Frankfurt, 15 January 2018 Thorsten Boeckers, CFO Lutz Grüten, Head of Investor Relations
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 2
K+S Group
Content
A K+S Strategy Shaping 2030
B Current Trading and Outlook
C Appendix
K+S Group 3
K+S Group
A strengths and weaknesses analysis
We have strong capabilities... ...but need to improve further
Financial challenges
• High debt load and limited headroom
Leader in salt, SOP, • Mainly perceived as MOP and de-icing player;
Leading magnesium sulphates full value of all portfolio components not realized
market position & premium fertilizers • Improvement needs in ROCE & value creation
Business challenges
• Engage with our environmental challenges
in a proactive and sustainable way
In exploration, • High dependency on weather and potash
Proven processing and prices
know-how project execution • Disadvantaged cost position in
potash production
• Slow product innovation
High-margin Structural challenges
industry and • Complex organization and "silos"
New market consumer • Limited value-added of central functions
development products • Untapped synergy potential
K+S Group 4
K+S Group
A fresh perspective on our existing portfolio
Production Customer
focus focus
Key financials 2016
(€m)
• MOP 1,285 37%
1 • Premium Fertilizers
139 11%
• Fertigation
Agriculture Revenue EBITDA
Revenue
share
EBITDA-
Margin
• Chemical
• Pharma 1,135 33% 21%
Potash Salt 2 • Ind. Specialties 233
• Food Processing
Industry Revenue EBITDA Revenue
share
EBITDA-
Margin
+ 3 • De-Icing
572
81
17% 14%
Communities Revenue EBITDA Revenue
share
EBITDA-
Margin
465 13% 18%
4 • Consumers 84
Consumers Revenue EBITDA Revenue
share
EBITDA-
Margin
K+S Group 5
K+S Group
Agriculture: Our specialties serving growing markets
¹) Fertigation (injection of fertilizers into an irrigation system)
€1.3bn
3% • Potassium chloride
• Application for tomatoes, chloride compatible crops
Fertigation
• Potassium sulphate
• Application e.g. for fruits, vegetables
48%
• Magnesium sulphate
• Suitable for high-sulphur demanded crops, e.g. oil plants
Premium Premium Fertilizers
Fertilizers
• Chloride free potash fertilizer for chloride sensitive crops
• Application crops: fruit, vegetables, potatoes, wine
49% • Combined potash and magnesium fertilizer
• Application for e.g. cereals, rapeseed oil, palm oil, soy
MOP
• Fertilizer with high content of magnesium and sulphur
• Application for chloride sensitive crops, e.g. fruits,
MOP = 60er Kali
Agriculture • Concentrated single-nutrient fertilizer containing 60% K₂O
• Application e.g. for cereals, oilseed rape, oil palm, soy
¹) Derived from FY 2016 revenues
K+S Group 6
K+S Group
Industry: Specialties can be used for various purposes
Salt specialties
E.g. used for water softening, animal nutrition or
ABS plastics
¹)
€1.1bn Electrolysis
KCL 99 is well suited for chloralkali electrolysis and
Salt Specialties used in the production of potassium hydroxide
Food Processing
Electrolysis E.g. extracting carrageenans from red algae that
are used for thickening of products manufactured
by the cosmetics and food industry
Food Processing
Potash specialties
Potash Specialties E.g. used for drilling or in
the manufacturing of dyes and pigments
Pharma Pharma
E.g. homeopathic medicinal preparations of
mineral salts
Animal Hygiene
Animal Hygiene
Used to granulate the animal hygiene product
Others
CATSAN®
Industry Others
Contains parts of Complementary Activities such
as waste management
¹) Derived from FY 2016 revenues
K+S Group 7
K+S Group
Consumers: Our strong brands and applications
¹)
€0.5bn Dishwasher salt is filled into the container
of a dishwasher, so that the ion exchanger
of the machine can soften the water. This
Other increases the cleaning efficiency.
Dishwasher Pool Salt is used for chlorination in public
swimming pools and wellness facilities to
disinfect the water and to prepare pool brines
Pool Salt
Ice Melt is sold as consumer products
Ice Melt from Morton Salt in the U.S.
Table Salt
Table Salt can be used for cooking and
baking, as well as for seasoning at the
Water Softening table.
Consumers The principle of water softening is a
removal of the hardness components
calcium and magnesium from the water
by the ion exchange method.
¹) Derived from FY 2016 revenues
K+S Group 8
K+S Group
We will implement our new 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 9
K+S Group We will transform ourselves and
Phase 1: create a solid financial base
Strengthen Shaping the
financial base organization
Realize Synergies Customer first: Lift our potential
• Focus on Product Market Segments
Operations: Lean management
Agriculture, Industry, Communities
Operations: Digital mining and Consumers to better penetrate
high-margin, non-commodity
Procurement business
> € 150m
p.a. run rate
Evaluate tailing piles optimization
after inflation Increase financial transparency
Sales excellence
by 2020 YE • Make performance transparent
along new Product Market Segments
Supply chain and logistics
G&A optimization Build ‘One Company’
• Commit to existing portfolio
Reduce indebtedness • Break up silos and create the
foundation to generate synergies
K+S Group 10K+S Group
What we’ve done – what our next steps are
Update on Shaping 2030
! Setting up project management
! Preparing to decide on new organization and reporting lines
Ongoing tasks
! Start of bottom-up validation of synergies (>150 Mio. € by 2020)
! Management remuneration (LTI) linked to share price performance
! Board of Executive Directors streamlined
! First concept about future organization and KPIs
Bottom-up validation of synergies
Next to come
!
! Project to lift synergies starting
! Final concept about future organization incl. KPIs
! Sustainability targets and KPIs defined. Possible use of solid residues clarified
We will keep you posted with updates on our Strategy in H1/2018 on a CMD
K+S Group 11K+S Group
Board of Executive Directors
Dr. Burkhard Lohr Thorsten Boeckers Mark Roberts Dr. Thomas Nöcker
CEO CFO COO Personnel Director
K+S Group 12K+S Group
Content
A K+S Strategy Shaping 2030
B Current Trading and Outlook
C Appendix
K+S Group 13K+S Group
New approach to environmental challenges works
Disputes and litigation
Efforts to improve our environmental standards
handled proactively
! Deep-well injection permit granted until 2021 ! Higher regional court
(1.5m m3) dismisses complaint brought
by prosecutor’s office - water
! Implementation of measures to limit outage days pollution accusations baseless
! Construction of KCF 1) well on track (reduction of K+S aims for an agreement
!
saline wastewater by 1.5m m3 to 5.5m m3) with the Federation for
! K+S mandated advisor K-UTEC to carry out a Environment and Nature
concept for extracting further products from saline Conservation Germany (BUND)
wastewater and to reduce occurrence of such Thuringian municipality of
!
Expansion of tailings pile capacity Hattorf (Werra): Gerstungen and K+S want to
!
Approval for ‘early commencement’ granted end their long-standing dispute
License to operate secured
1) Kainite Crystallization and Flotation Facility K+S Group 14K+S Group
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 15K+S Group
Content
A K+S Strategy Shaping 2030
B Current Trading and Outlook
C Appendix
K+S Group 16K+S Group
Q3/17 – considerable improvement
Highlights Financials
No outage days at Werra plant in Q3 € million Q3/16 Q3/17 YoY
EBITDA up from €56m to €77m (+37%) Revenues 688 727 +6%
FCF further improved (+47%) t/o Potash 302 358 +19%
Challenges: slower ramp-up at Bethune, t/o Salt 346 329 -5%
SOP pricing and hurricane Irma EBITDA 56 77 +37%
D&A -87 -64 -
EBIT I -31 12 -
EBIT I in €m
t/o Potash -49 2 -
4 - 10
17
t/o Salt 18 17 -9%
32 12
Adjusted net profit -27 2 -
-31
Adjusted EPS (€) -0,14 0,01 -
9M/16 9M/17 YoY
Operating cash flow 390 382 -2%
Volume/Mix
FX
Q3/16
Q3/17
Price
Other effects
Adj. free cash flow -456 -241 +47%
CapEx 904 568 -37%
K+S Group 17K+S Group
We aim for a positive free cash flow in 2019
Phase 1: Transformation Phase 2: Growth
Free cash flow bridge approximation 2016-2020
Based on current portfolio – inorganic growth not included Ambition
+ CapEx Investment grade rating
+ Werra
+ Bethune achieved in 2023
- FX
Fully invested in - WC
best class assets EBITDA €3bn
like Bethune
ROCE >15%
Actual 2017e 2018e 2019e 2020e 2030
2016
Massive positive swing in free cash flow
K+S Group 18K+S Group We identified ample growth opportunities in our
Phase 2: Product Market Segments starting from 2020
Revenue shares and CAGR 2016-2019-2030 Growth initiatives from 2020
7%
5%
Organic ~€11bn
2%
Inorganic
• Tapping the potential of existing assets and expansion options
• Expand offering of specialty fertilizers
45%
• Develop strong position in fertigation
• Develop advanced business models (e.g. agro-platform in Africa)
8%
• Strengthen portfolio of specialty industrial products
• Expand offering for the pharma industry
35%
€3.5bn • Grow into Asia
43%
Agriculture 37% 9%
28% • Leverage branding capabilities in consumer salt
10% • Grow into Asia
Industry 33%
6%
12%
Consumers 13% • Strengthen position in existing markets
10%
Communities 17% 17% 4%
2016 2019 2030
K+S Group 19K+S Group
Currency Management
2017/2018
1.25
1,25
Worst Case
Limitation of risk
1.20
1,20 Planned EUR/USD rate
1.15
1,15
EUR/USD
Best Case
1,10
1.10
1,05
1.05
Limitation of chance
1,00
1.00
Anticipated average exchange rate (full year 2017): 1.12 EUR/USD (incl. premium)
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
K+S Group 20K+S Group
Guidance: Housekeeping items
FY 2016 Guidance pre Q3 FY 2017e
Potash 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
~200 days ~55 days ~25 days
(Werra)
¹Incl. ̴ 4mt of potassium sulphate and potash grades with lower mineral content
K+S Group 21
²Excluding any impact from US tax reformK+S Group
Financial Calendar
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
K+S Group 22K+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 Katharina Volkmar
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 katharina.volkmar@k-plus-s.com
Laura Schumbera Martin Heistermann Alexander Enge
Junior Investor Relations Manager Senior Investor Relations Manager Investor Relations Manager
Phone: +49 561 / 9301-1607 Phone: +49 561 / 9301-1403 Phone: +49 561 / 9301-1885
Fax: +49 561 / 9301-2425 Fax: +49 561 / 9301-2425 Fax: +49 561 / 9301-2425
laura.schumbera@k-plus-s.com martin.heistermann@k-plus-s.com alexander.enge@k-plus-s.com
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