capital markets dayexperience growth. capital markets day fertilizer perspectives joachim felker...
TRANSCRIPT
Experience growth.
Capital Markets Day Fertilizer Perspectives
Joachim FelkerMember of the Board of Executive Directors
Berlin, 8 December 2010
Capital Markets Day Fertilizer Perspectives
Joachim FelkerMember of the Board of Executive Directors
Berlin, 8 December 2010
December 2010 K+S Group 1
Content
A. Fertilizer Market Environment
K+S Group
B.
Nitrogen Market Environment
- Compo-
K+S Nitrogen
-
Potash One
C.
Potash Market Environment
-
Future Potentials in Germany
-
Growth Perspectives
December 2010 K+S Group 2
Key Drivers of the Fertilizer Business
Despite decreasing availability of arable farmland, global production of soft commodities has to increase:
steadily increasing world populationchanging diets toward higher meat consumption (e.g. 1 kg beef = 8 kg animal feed) increasing importance of renewable raw materials for the production of bio energy
As a consequence, fertilizing with key nutrients nitrogen (N), phosphate (P)and potash (K), but also increasingly magnesium (Mg) and sulphur
(S)is the solution to coping with this challenge
Nutrients cannot be substituted and a balanced fertilization of all nutrients is necessary to achieve optimal yields. Emerging countries, in particular, should still significantly increase the potash proportion of their total fertilizer application
Medium- and long-term increase in global fertilizer consumption (N, P and K)of 2 to 3% p.a. expected
(Source: IFA)
K+S offers its worldwide customers all nutrients in a market-oriented specialised product range
K+S Group
December 2010 K+S Group 3
Development of Demand – Long-term Trend
60
2417
112
5966
0
20
40
60
80
100
120
Nitrogen Phosphate Potash
Current Application Rate
Scientifical Recommended Application Rate
lb/acre
Current Application RateScientifically recommended Application Rate
Sources: IFA, IPNI Studies, Ohio State University Studies
Global Application Rate for Major Nutrients
Potash in particular offers the highest growth potential medium to long-term
Potash and Magnesium Products
December 2010 K+S Group 4
Over the past thirty years, annual global production of cereals has often fallen short of demand
Despite reasonable harvest levels during the last ten years, these structural supply anddemand gaps have resulted in low stocks-to-use ratios on a historical basis
Although ideal weather conditions in 2008 and 2009 resulted in record harvests worldwide, stocks-to-use ratios remained on a relatively low level
Low Stocks-to-use Ratios of Agricultural Products
Production and consumption development vs. stocks-to-use ratio (Wheat and coarse grains)
1.000
1.200
1.400
1.600
1.80019
81/8
2
1986
/87
1991
/92
1996
/97
2001
/02
2006
/07
in m
illion
tonn
es
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
Stocks-to-use ratio
Production Consumption Stocks-to-use
2010
/11e
Source: USDA; as of 9 November 2010
1,800
1,600
1,400
1,200
1,000
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
K+S Group
Critical Level
December 2010 K+S Group 5
1731
1827
1650
1700
1750
1800
1850
Crop Prices: Key Fertilizer Demand Driver
5
Potential global cereals* shortfall in 2011/12
Consecutive years with above-average yield unlikely (weather conditions driven)
-
Even more unlikely given past general under-application of fertilizer
Surplus/deficit in crop production key price trigger for soft commodities
High crop prices enable and incentivise farmers to apply fertilizers
-
Yield and quality game
High production
deficit
Stocks-to-use ratio to decline
from 19%
to 13%****
*
Wheat and coarse grains**
Based on last 5 years average of harvested area multiplied by last 5 years’
average yield (531m hectares x 3.3 tonnes per hectare) ***
Based on 2010/11 consumption (1,790mt) multiplied by last 5 years’
annual average demand growth rate of 2.1%****
Implied stocks-to-use ratio: ending
stock 2010/11 (333mt) less potential shortfall (96mt) divided by potential consumption 2011/12 (1,827t)
Note: 2009/10 and 2010/11 USDA estimates
K+S Group
Forecast production
for 2011/12 **
Forecast
consumption
2011/12***
Forecast
shortfall 2011/12
96
December 2010 K+S Group 6
50%
100%
150%
200%
250%
300%
350%
400%
70%
80%
90%
100%
110%
120%
130%
Prices for Agricultural Products – spot Prices for Agricultural Products – future
Prices for Agricultural Products – Spot vs. Future
Strong increase in prices for agricultural products since the middle of the year
Future prices of agricultural products mirror the capital markets’ expectation of an elevated price level for the next two years
K+S Group
Wheat Soybeans Corn Palmoil
Dec.‘05
Dec.‘06
Dec.‘07
Dec.‘08
Dec.‘09
Nov.‘10
Dec.‘04
Dec.‘10
Dec.‘11
Dec.‘12
May‘13
Sourcee: Bloomberg; as of 26 November 2010
December 2010 K+S Group 7
Plant
protection agentsVariable costs
Fixed costs (incl. lease)
FertilizationOther costs (e.g. insurance, water) Seeds/plants
Profitability of Wheat in EuropePotash and Magnesium Products
Assumptions: without
agricultural
subsidies, incl. interest
expenses
for
pre-financing
costs, 100% use
of mineral fertilizers
(no organic
fertilizing), straw
stays
in the
field
(straw
fertilizing); fertilizer
use
for
8 t/ha yield: 80 kg/ha MOP, 536 kg/ha KAS and 139 kg/ha TSP; for
lower
yields, lower
fertilizer
requirement
adjusted
accordingly; Sources: costs
(20 ha) according
to Kuratorium für Technik und Bauwesen in der Landwirtschaft e. V. (KTBL), LAND & Forst, yield
according
to Agrarstatistik Destatis, nutrient
extractions
according
to Guidelines
for
Fertilizer Use
in German Federal States; fertilizer prices: Retail
prices
2010 taken
from
LAND & Forst: KAS 208 €/t, MOP 335 €/t, TSP 357 €/t. Wheat
price
estimate
follows
the
development
of Euronext
price
less
transportation
cost
assumption.
The
latest
increase
of the
wheat
price
should
enable
farmers
to realize
a profit
potential of around
€
325 per hectare
(excl. subsidies) in 2010 compared
to €
231 per hectare
in 2008 and €
71 per hectare
in 2009.
Yield: 8 t/ha Yield: 8 t/ha Yield (e): 7.0 t/haWheat price: 180 €/t Wheat price: 135 €/t Wheat price (e): 190 €/t
7
CostsCostsRevenues
2008 2009 2010e
Costs
RevenuesProfit
potential: € 231
Revenues
Profitpotential:
€ 325
2008
2009
2010e
Year Fertilizer share of total costs
30% fertilizer
costs
(4% K)
18% fertilizer
costs
(4% K)
17% fertilizer
costs
(2.5% K)
459 459 459
183 165
110 119 113
70 77 77
366181 174
157
0
200
400
600
800
1000
1200
1400
1600
Profit potential:
€ 71
December 2010 K+S Group 8
Content
A.
Fertilizer Market Environment
-
Potash One
C.
Potash Market Environment
-
Future Potentials in Germany
B. Nitrogen Market Environment
-
Growth Perspectives
- Compo-
K+S Nitrogen
K+S Group
December 2010 K+S Group 9
BASF Antwerp
NPK (MOP, SOP)ENTEC-NPKKASANAS
BASF PEC Rhin Ottmarsheim
KASAN
Lanxess Antwerp
AS StandardGranammon
BASF Ludwigshafen
ass / ENTEC 26
Nitrogen FertilizersK+S Nitrogen – Strong Production Partners
Business Model:Trading BusinessContractual agreements with BASF for the exclusive marketing of their fertilizers with limited chances and risks for K+SOne of the leading suppliers of ammonium sulphate
December 2010 K+S Group 10
0
200
400
600
800
1.000
1.200
1.400
1.600
1.800
AS KAS/AN ASS ENTEC26
NPKC/NP SCl
NPK S ENTECNPK/NP
kt OverseasEurope (ex Germany)Germany
Sales volume: 4.7 million tonnes
Europe (ex Germany)53%
Overseas32%
Germany15%
Nitrogen FertilizersK+S Nitrogen – Sales Volumes by Region
Major Product Groups Sales Volumes by Region 2010e
Ammonium Sulphate Straight Nitrogen Fertilizers Complex Fertilizers
December 2010 K+S Group 11
Nitrogen FertilizersPremium for N in KAS vs. Urea
0
0,2
0,4
0,6
0,8
1
1,2
1,4
Jul-05 Jan-06 Jul-06 Jan-07 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10-50%
0%
50%
100%
150%
200%
250%
300%
N Urea €/kg N Premium for KAS €/kg Premium in %
30%
1.4
1.2
1.0
0.8
0.6
0.4
0
0.2
€/kg
December 2010 K+S Group 12
Poor earnings position of all competitors
Many suppliers present themselves as full-range providers
Shelf place being bought aggressively in individual countries
Conditions, rebates in kindare widely used
Mid-price ranges underpressure
Heterogeneous European market
Moderate growth to be expected in segment
Influence of weather on demand situation
More strict guidelines in Europe(fertilizers and plant protection)
Concentration process
Internationalisation
Powerplay in purchase
Assortment reduction- Fewer brands- Expansion of private labels
Trend towards introducingbio-/eco-products
Competitive pressure on price
Oversupply of shelf space
Nitrogen FertilizersCompo Consumer – Market Environment
Competition
Demand
Customers
Climate / laws
December 2010 K+S Group 13
COMPO is a leading provider in a market that requires consolidation
In compliance with our growth strategy, we will focus our financial and management resources in particular on the Potash and Magnesium Products and Salt business segments
On the other hand, appropriate capacity to act is important for COMPO, especially atpresent
Therefore, we announced in June 2010 that we are considering the sale of COMPO.A result of the process is expected within one year
K+S is Considering the Sale of COMPONitrogen Fertilizers
December 2010 K+S Group 14
Project Status
Concept worked out for a possible corporate and business carve-out of COMPO from the K+S Group
All COMPO interfaces within the K+S Group identified
Concept worked out to separate the sales platforms in Asia, Europe andNorth/Central/South America
Preparing global IT separation
Creation of a Financial Factbook
Potential interested parties to be spoken to at end of 2010 / beginning of 2011
A result of the process is expected by mid-2011
Nitrogen Fertilizers
December 2010 K+S Group 15
Content
A.
Fertilizer Market Environment
-
Potash One
C. Potash Market Environment
-
Future Potentials in Germany
B.
Nitrogen Market Environment
-
Growth Perspectives
- Compo-
K+S Nitrogen
K+S Group
December 2010 K+S Group 16
~0.7
~16
~9.7
~18
~4.2~9
~23.3
World Potash Production and Sales by Region K+S Group
Million tonnes
Incl. sulphate
of potashand low-grade
potashSources: IFA, K+S
World potash production:2010e: ~51 million t2009:
33.7 million
t2008:
56.0 million
t2007:
57.8 million
t
World potash sales:2010e: 52-53 million t2009:
31.0 million
t2008:
54.5 million
t2007:
58.7 million
t
~6 ~5.9
~1.5
~8.6
December 2010 K+S Group 17
World Potash Capacity, Production and Sales
55.0 35.2 45.1 46.0 48.5 53.9 56.5 50.9 57.8 56.0 33.7 51
36.2 31.0
52.6
43.9 45.549.1
54.2 54.4
50.7
58.754.5
0
10
20
30
40
50
60
70
1988 1993 2001 2002 2003 2004 2005 20072006 2008 2009 2010e
China Financial crisisSoviet Union
K+S Group
Million tonnes
ProductionAvailable capacity Sales
Sources: IFA, K+S; incl. sulphate
of potash
and low-grade
potash; based
on IFA supply
capability
data
Transitional year 2010: significant revival in demand expected, but no satisfactory utilisation of capacity yet
52-53
December 2010 K+S Group 18
0
200
400
600
800
1000
0
200
400
600
800
1000
MOP Price DevelopmentUS$/t
US$/t
Potash and Magnesium Products
Overseas (cfr)
Northwest-Europe (standard, fob)
Brazil
(granular)
South-East
Asia (SEA, standard)
● 23 December 2009:Contract with Chinese importers and BPC fixed at
US$ 350/t for standard MOP
● Beginning of 2010: Contracts with India and Canpotex/BPC fixed at US$ 370/t
● Mid January 2010: In Europe K+S announced €
285/t for granulated MOP and a price increase by €
12/t as of March
● Mid June 2010:K+S announced an increase of a further
€
8/t to €
305/t in Europe
● End of August 2010: BPC announced US$ 420/t for granulated MOP in Asia and Brazil
● Mid September 2010:K+S announced a further increase of €
12/t to €
317/t in Europe
● Beginning of November 2010: BPC announced US$ 450/t for granulated MOP in Asia and Brazil* Until
end of September 2010 MOP standardSource: FMB; as of 18 November 2010‘05‘042003 ‘06 ‘07 ‘08 2010‘09
‘05‘042003 ‘06 ‘07 ‘08 2010‘09
374
413 BrazilSEA409
*
December 2010 K+S Group 19
10.7
32.9
23.9
9.68.5
3.41.6
6.3
3.1
11.2
23.021.7
11.1
8.6
3.1 2.7
13.9
4.73.4
8.1
1.93.5
9.59.0
22.7
31.8
10.1
K+SBPC•
Belarus-
kali• Uralkali
ICL• DSW• CPL• Iberpotashparticipationof PotashCorp. in ICL
APCparticipationof PotashCorp.
SQMparticipationof PotashCorp.
IPC• Silvinitparticipationof Uralkaliin Silvinit
Others• Intrepid• Vale• Compass
Supplier Structure on the World Potash Market
Canpotex• PotashCorp
• Mosaic• Agrium
China• morethan
20producers
Figures
in %20092008
K+S Group
Sales volumes
in metric
tonnesSources: IFA, K+S
2010
December 2010 K+S Group 20
World Potash Capacity, Production and Sales
33.756.057.850.956.553.948.546.045.135.255.0 51
54.558.7
50.754.454.2
49.145.543.9
52.6
31.036.2
0
10
20
30
40
50
60
70
80
1988 ’93 ’01 ’02 ’03 ’04 ’05 ‘13’07’06 ’08 ’09 ’10 ’11 ’12(e)
ChinaFinancial
crisis
Soviet
Union
Potash and Magnesium Products
Million tonnes
ProductionAvailable capacity
Sales
Incl. sulphate
of potash
and low-grade
potashCapacity
development
2010-2014 based
on IFA supply
capability
data Sources: IFA, K+S
Transitional year 2010: significantrevival in demand expected, butno satisfactory
utilisation of capacity
yet
As of 2011, long-term growth ratesagain expected at 3% to 5% p.a.
Utilisation levels are estimated to be about 85% annually until 2014 and will thus reach a good level
Risk: announced new capacitycould be delayed, postponed orcancelled due to an inadequateprice level and technological/ geological challenges
Ø +3%
60Ø +5%
‘14
55
6367
Brownfield projectsGreenfield projects
52-53
December 2010 K+S Group 21
0
2000
4000
6000
8000
10000
80/81 84/ 88/ 92/ 96/ 00/ 04/ 08/ 12/f
0
8.000
16.000
24.000
32.000
40.000
80/81 84/ 88/ 92/ 96/ 00/ 04/ 08/ 12/f
0
4.000
8.000
12.000
16.000
20.000
24.000
80/81 84/ 88/ 92/ 96/ 00/ 04/ 08/ 12/f
Central and Eastern Europe, Central Asia Latin America, Asia, Africa, Oceania
0
4.000
8.000
12.000
16.000
20.000
80/81 84/ 88/ 92/ 96/ 00/ 04/ 08/ 12/f
North America, Western Europe, Australia, Japan
World
1.00
0 t K
2O
1.00
0 t K
2O
Developed markets
Transitional markets
1.00
0 t K
2O
Emerging markets
1.00
0 t K
2O
Potash and Magnesium ProductsAgricultural Potash Consumption by Region
Source: IFA
December 2010 K+S Group 2222
K+S Group
Located in the Heart of Saskatchewan’s Potash-Rich Basin
Regina
Two additional potash permit areas in the Esterhazy potash region
Potash One is a Vancouver-basedresource company engaged in the exploration and development of advanced potash properties.
Potash One holds several potashexploration licences in the Canadianprovince of Saskatchewan, includingthe Legacy Project – an advanced Greenfield project to develop a potash solution mine.
K+S estimates production capacity of up to 2.7 million tonnes of potassium chloride per year.
The realisation of this production capacity would represent an approximately USD 2.5 billion capital investment into Saskatchewan and create up to 300 highly-skilled jobs.
Initial production no earlier than 2015.
Friendly Takeover Bid for Potash One
December 2010 K+S Group 23
Overview of the Legacy Project
Legacy Project
Depth 1,500 metres
Total capex $2.5 billion
K+S Group
Mining technique Solution Mining
Expected maximum production capacity 2.7 million t KCl
product/a
Patience Lake
Belle Plaine
Esterhazy
Geological Overview Key data *
Environmental impact statement approved
* Data based on K+S due diligence
December 2010 K+S Group 2424
Solution Mining Expertise Within the K+S Group
With more than 100 years experience in potash mining, K+S has the geological and miningexpertise to successfully execute this greenfield project
K+S will also engage consultants and certain personnel from Potash One to supplementits team
Our new Canadian potash development complements our existing presence in saltproduction stemming from our successful acquisition of Morton Salt in 2009 and ourlongstanding history of potash distribution in Canada and the US
K+S Group
esco Frizia
Zout
Site, Harlingen, The Netherlands
Examples of Solution Mines within the K+S Group
esco Bernburg
Site
Germany
Lindbergh Alberta, Canada
December 2010 K+S Group 25
Potash and Magnesium Products
● K+S evaluates the reactivation of former potash sites such as Rossleben
or
Siegfried-Giesen, the latter being a K+S reserve capacity since 1987
Overall target: To replace Sigmundshall, which will be depleted by 2018
● We are in contact with GVV, the owner of the Rossleben
potash mine
and consider a feasibility study on Siegfried-Giesen
for 2011
Zielitz
Neuhof-Ellers
Sigmundshall Bergm.-Hugo
Siegfried- Giesen
HattorfUnterbreizbach
Wintershall
Future Potentials in Germany
RosslebenKassel
December 2010 K+S Group 26
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 fore-
casts prove not to be correct or should certain risks –
such as those referred to in the recent Risk
Report –
materialise, actual developments and events may deviate from current expectations. The
Company assumes no obligation to update the statements contained
in this presentation, save for
the making of such disclosures as are required by the provisions
of statute.
K+S GroupForward-Looking Statements
K+S Group
December 2010 K+S Group 27
K+S AktiengesellschaftBertha-von-Suttner-Straße
734131 Kassel | Germanyphone:
+49 (0)561 / 9301-0fax:
+49 (0)561 / 9301-1753
Investor Relationsphone:
+49 (0)561 / 9301-1100fax:
+49 (0)561 / 9301-2425email:
www.k-plus-s.com
K+S AktiengesellschaftBertha-von-Suttner-Straße
734131 Kassel | Germanyphone:
+49 (0)561 / 9301-0fax:
+49 (0)561 / 9301-1753
Investor Relationsphone:
+49 (0)561 / 9301-1100fax:
+49 (0)561 / 9301-2425email:
www.k-plus-s.com
Experience growth.