baader bank german corporate day - k+s aktiengesellschaft
TRANSCRIPT
Baader Bank GermanCorporate Day
K+S Group
Lutz Grüten, Head of Investor Relations
Toronto, 17 January 2019
1
K+S Group
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.
Current Trading
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K+S Group
K+S Group
Potash Market update
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
Pricing (Source: FMB)
80%
90%
100%
110%
120%
130%
140%
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18
SOP Europe
MOP Brazil
MOP Europe
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K+S Group
K+S Group
Salt Market update
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
Pricing trends in de-icing
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K+S Group
K+S Group
Extreme weather situation in Germany - implications
0
50
100
Ma
y
Jun
Jul
Au
g
Se
p
Oct
Nov
Dec
In l/m2
Rainfall comparison (Werra)
2018
5yr Average
Source: Wetterkontor.de
Impact on K+S
Long-lasting severe drought in 2018 led to temporary
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
> 10% to 600,000 cubic meters
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
Q1 2019 now secured due to heavy rainfalls in Dec
-> basin levels significantly lowered
Shaping 2030 Strategy
K+S Group 7
K+S Group
Tapping the full potential of our existing assets... and establish the most value-creating portfolio combination
Exploring new adjacent growth areas... pursuing growth by venturing into new markets where we can use our existing capabilities
Increasing the share of our specialties business... to ensure an overall stabilized performance and reduce our dependency on standard products and weather
'One Company' ... thinking and acting as 'One Company' and realizing synergies between our businesses
We will be the most customer-focused, independent minerals company and grow our EBITDA to €3bn in 2030 by ...
Our vision for 2030
IndustryAgriculture
ConsumersCommunities
K+S Group 8
K+S Group
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
We will implement our strategy in two phases
Phase I
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K+S Group
K+S Group
Phase I: Building a basis for our growth options
Matrix
Operating Unit Function
Agriculture
Industries
Consumers
Communities
Customer Segments
Operations
IndustryAgriculture
ConsumersCommunities
Board of Executive Directors
COO Group CFO GroupCEO Group
CEO Americas
Head of Human Resources
Head of Corporate Communications
Head of Corporate Development
Head of Corporate Controlling
Matrix
Executive Committee
Head of Marketing,Sales & Supply Chain
Excellence
Marketing & SalesCommittee
Operations Excellence Committee
Head of Operations Excellence
CEO Europe & Agriculture
Board of Executive Directors
Divisional Silos
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K+S Group
K+S Group
SHAPING 2030
Lift synergies
Operations
Procurement
Supply Chain and Logistics
Commercial Excellence
SG&A Optimization
> €50m
Net synergies YE 2020 (vs. 2017)
> €30m
> €20m
> €20m
~ €30m
COO
Sponsor
CFO
COO
COO
CEO
∑ > €150m
Synergies: Breakdown by program
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K+S Group
K+S Group
Shaping 2030 EBITDA impact
Costs Synergies > €150m
Total costs for synergy program: ~ €150m (2020 year end)
2018e 2019e 2020e
K+S Group 13
K+S GroupA
ssu
mp
tio
ns
Current purchase conditions for gas reflected
Modified ramp-up curve taken into consideration
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
We have updated our valuation for Bethune
Net Present Value (NPV) Bethune (1)
K+S Group 14
K+S Group
This NPV equals an EV per share of 25 EUR
Variation NPV change
MOP gran. Brazil +/- 10 USD/t +/- €200 million
“We create value for our stakeholders!”
Net Present Value (NPV) Bethune (2)
Sen
siti
viti
es
NPV for Bethune EUR 4.8 bn
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K+S Group
K+S Group
Site costs (FOB) in comparison (2020)
* column width = production capability in million tonsSource: CRU Report 2016, K+S
-30%
BU Potashw/o Bethune
(incl. Specialties)
Best-in-class
USD/t
K+S Bethune(in 2023)
K+S Zielitz(Purely MOP)
K+S Bethune*
The Bethune ramp-up to 2.86 million tons in 2023 (production capability) significantly improves K+S's competitive position.
Phase II
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K+S Group
K+S Group
Implications for K+S
Arable land shrinking
Yield needs to be improved
Higher efficiency of fertilizationand irrigation needed
Plants have to be more stressresistent
Infrastructure needs to beimproved focus on renewable energy
Growing population, especiallyin Asia, needs more salt forvarious purposes
Today: 7.3bn
8.5bnGlobal population in 2030
Per decade
0.2Average global warming (ºC)
70% of water used for agriculture
40%of population suffer from water shortage by 2030
2015: 3.0bn
5.4bnpeople belong to the middle-class by 2030
Our strategy has incorporated important megatrends
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K+S Group
K+S Group
Geo-expansion Fertilizer Industry
Africa
Asia
Increase of fertilizer specialties
Ramp of low cost commodities
Expand Pharma & Food portfolio
Chemical applications
Growth areas and ideas cover the full growth landscape
K+S Growth Landscape
Growth areas and ideas cover core and adjacent businesses
Financials
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K+S Group
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
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K+S Group
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(pre sale/ purchase of securities)
-1,222 -212 -410 -623 -697 -90 -198 -336
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%
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K+S Group
K+S Group
Actual2017
Price Volume/Mix DroughtEffect
Currency OtherEffects
(net)
2018e
577
€ million
€ 570 – 630m
Main effects:
+ Potash prices
+ De-icing salt
prices
Main effects:
+ Bethune
+ Tangibly higher salt
volumes
- Production issues
Germany
Main effects:
- Planning
assumption:
1.20 EUR/USD
Main effects:
+/- Sigmundshall
- Production
issues
- Logistic costs
- Shaping 2030
Cash unit cost per ton (2017: 214€/t) likely to be at ~ 215 €/t in 2018
Full year guidance is including weather-related outage days in Q4 (roughly €10m)!
Guidance 2018: EBITDA between € 570 – 630m
Underlying assumptions: Tax rate: ~26-28% Financial result: ~-120 million EUR CapEx: ~ 500 million EUR D&A (incl. Bethune): 380 to 400 million EUR Reconciliation (EBITDA): ~-70 million EUR
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K+S Group
K+S Group
Expected Development of our Potash Production
Change in Production
>500ktWerra: no lack of staff and 50% broken machinery backWerra: no outage days Neuhof: roof stability improved
+100ktKCF
-600ktSigmundshall
+300 to 500kt
Bethune
-100ktLower K2O content in
Germany
High-cost production to be replaced by low-cost volumes from Bethune
~ 6.2mt Germany (incl. outage days)
~ 1.4mt Bethune
0.1mt Huludao
Total: ~ 7.7mt
Sales Volume: ~7.5mt
2018
6.1 – 6.2mt Germany
1.7 – 1.9mt Bethune
0.1mt Huludao
Total: 7.9 – 8.2mt
Cash Unit Cost: > € 200
due to overall cost inflation
2019
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K+S Group
K+S Group
CapEx development 2015-2020
0
200
400
600
800
1.000
1.200
2015 2016 2017 2018e 2019e 2020e
BU Potash (ex Bethune)
Bethune
BU Salt
Complementary Activities
in m€
25
K+S Group
K+S Group
Moving parts Free Cash Flow 2017-2020
-390
Significant improvement
20
17
Op
era
tio
ns
Shap
ing
Cap
Ex
20
18
e
Op
era
tio
ns
Shap
ing
Cap
Ex
20
20
e
+ Bethune+ Price– Werra – FX + Bethune
+ Volume= Price= FX– Net Working Capital
K+S sustainability KPIs and targets 2030
K+S Group 27
K+S Group
Goal KPITarget until 2030 at
the latest
PEO
PLE
Health & Safety Lost time incident rate (LTIR)0
Vision 2030
Diversity & Inclusion
Employees’ favorable perception of inclusive work environment (percent)
>90
Human RightsSites covered by a human rights due diligence process(percent)
100
K+S sustainability KPIs and targets 2030 - People
K+S Group 28
K+S Group
Goal KPI Target until 2030 at the latest
ENV
IRO
NM
ENT
Water
Deep well injection of saline waste water in Germany (m³ p.a.)
0 Starting January 2022
Additional reduction of saline process water from potash production in Germany (m³ p.a.)
-500,000 Excluding
reduction by KCF facility and end of production SI
Waste
Amount of residue used for other purposes than tailings or increased amount of raw material yield (milliontonnes p.a.)
3
Additional area of tailings piles covered (ha) 155
Energy & Climate
Carbon footprint for power consumed (kg CO2/MWh) (percent)
-20
Specific greenhouse gas emissions (CO2) in logistics (percent)
-10
K+S sustainability KPIs and targets 2030 - Environment
K+S Group 29
K+S Group
Goal KPITarget until 2030 at
the latest
BU
SIN
ESS
ETH
ICS Sustainable Supply
Chains
Critical suppliers aligned with the K+S Group Supplier Code of Conduct (SCOC) (percent)
100
by end of 2025
Spend coverage of the K+S Group SCoC (percent)> 90
by end of 2025
Compliance & Anti-Corruption
All employees reached by communication measures and trained appropriately in compliance matters (percent)
100
by end of 2019
K+S sustainability KPIs and targets 2030 - Business ethics
30
K+S Group
K+S Group
IR Contact Details
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]
Christiane MartelRoadshow 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]
Julia Bock, CFASenior Investor Relations Manager
Phone: +49 561 / 9301-1009Fax: +49 561 / [email protected]