Experience growth.
Compendium Facts worth knowing about K+S
K+S Aktiengesellschaft
March 2016
2
Investment Case
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Investment Case
3
Salt Business Unit
Complementary Activities
Potash and Magnesium Products Business Unit
K+S Group
Unique position in Europe and specialty fertilizers
Legacy Project heading closer to commissioning in 2016
Salt business to improve earnings substantially
Ongoing cost reductions and efficiency improvements
Dividend payout of 40-50%
Attractive mid-term EBITDA goal: ~ € 1.6 billion in 2020
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
What Makes Us Strong?
4
• Geographic reach Our world-class production assets grant a close proximity to both core customers and attractive growth regions.
• Broad product portfolio The uniqueness of our crude salt deposits allows us to produce specialties that many of our competitors are not able to offer in the same way. Both business units offer a unique portfolio of commodity- and specialty products.
We are well positioned to participate in long-term growth trends of population growth, economic growth, industrialisation, increasing standards of living and higher protein consumption.
• Strongly positioned
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Attractive Mid-Term Outlook
5
Group EBITDA expected to increase significantly by 2020
Despite current market turmoil, mid-term fundamentals of the potash business remain intact
Legacy will significantly contribute to the mid-term earnings goal
Our Salt business continues to grow its profitability
FY 2015 FY 2020
~ € 1.6 billion
Potash and Magnesium
Products
Salt
€ 1.1 billion
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Management Agenda
6
Low cost commodity production with Legacy in
Canada ensuring cost competitiveness and
participation in future growth in the potash
markets
German mines remaining attractive with broad
specialty portfolio and close proximity to
customers
Salt with unrivalled footprint and product
range
Opening Legacy this summer –
production of 1st ton end of 2016
Managing environmental
challenges particularly in
Germany
Keeping cost discipline above
and beyond “Fit for the
Future”
Successful implementation of “Salt 2020“
Strategy
Enhancing portfolio of
higher yielding products
7
K+S Group Two-pillar strategy
Global Presence
Positioned for growth
Earnings-based dividend policy
Attractive mid-term outlook Balanced regional portfolio
Sustainable margin growth through specialisation
Cost discipline
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Corporate Strategy
8
Reduction of seasonal and regional fluctuations in demand for salt and fertilizers due to a balanced regional portfolio
Fertilizers: Expansion of market presence in important overseas regions and tapping into new attractive sales regions in future growth regions
Salt: Local production in the volume-driven Salt business
Optimisation of the international production network
Generation of synergies in the exchange of technical, geological and logistics know-how between the potash and salt production
External growth in the core business sectors
Fertilizers and Salt
The goal is to be our customers’ preferred partner
Strengthening of customer loyalty through service efforts, e.g. targeted advice to customers in the use of fertilizers
Differentiation and Sustainable Margin Growth through Specialisation
Expansion of Strategic Business Sectors through Acquisitions and Cooperations
Expansion of a Balanced Regional Portfolio
Setting Standards for Quality, Reliability and Service
Increasing Efficiency and Exploiting Synergies
Consolidation and expansion of market positions by increased marketing of specialty products
Realisation of more attractive margins through refinement strategy
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Active Portfolio Management
9
Salt
Acquisition
Salt
Foundation
Salt
Acquisition
Salt
Acquisition
Fertilizer
Divestment
Fertilizer
Divestment
Fertilizer
Acquisition
Fertilizer
Acquisiton
Fertilizer
Acquistion
1999 2002 2006 2012 2011 2009 2000
Salt
Acquisition
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Global Presence1
10
40 %
13 %
36 %
9 %
2%
1 Revenues by Region 2015
70 % 22 % 5 % 3 %
Germany North America South America Rest of Europe
Employees by Region 2015
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Our Products
11
in % of sales volumes , FY 2015
Potash and Magnesium Products Salt
Industrial products
Specialties
KCl (MOP)
De-icing salt
Industrial salt
Salt for chemical use
Food grade salt
46% 56%
44% 28%
10% 9%
7%
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Leverage Customer Relationships within K+S Group
12
Significant overlap in most of our market segments
Identify and leverage which business unit has the best market access and customer relationships
Market oriented synergies
Morton selling BU Potash‘s KaliSel in the US
Operational synergies
Common production methods
Define common operational KPIs
Procurement
De-icing
Fertilizer
Food processing
Chemicals
Pharma
Oil & Gas
Agriculture (Feed)
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Adding Value Along Our Entire Supply Chain
13
Application Our customers apply our products, use our raw materials in their processes or process them in their products. We make extensive product information available and advise our customers on the application of our products.
Sales/Marketing The K+S Group wants to be its customers’ preferred partner in the market. High product quality and reliability are decisive preconditions for this. K+S offers a comprehensive range of goods and services for agriculture, industry and private consumers.
Logistics The long-term securing of freight capacity is of strategic importance to us. A large part of our international transport volume is forwarded by service providers with which we maintain long-standing partnerships.
Production The refining of raw materials is one of our core competencies. Above ground, the crude salt is processed in complex, multi-phase, mechanical or physical processes, with the natural properties of the mineral remaining unchanged.
Mining We extract raw materials in conventional mining above and below ground as well as through solution mining. We also use the power of the sun and extract salt by vaporating sea water or saline water.
Exploration Our potash and salt deposits came into being millions of years ago. They are either our property or we have corresponding rights or approvals that allow the extraction or solution mining of the raw material reserves.
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Key Financials
14
4,0
3,9 3,9
3,8
4,2
2011 2012 2013 2014 2015
Revenues (€ billion)
1.146 1.033
907 896 1.058
2011 2012 2013 2014 2015
EBITDA (€ million)
906 804
656 641
782
2011 2012 2013 2014 2015
EBIT I (€ million)
23 20
17 17 19
2011 2012 2013 2014 2015
EBIT Margin (%)
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Dividend Policy
15
Target payout ratio of 40-50%
0%
2%
4%
6%
8%
10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2011 2012 2013 2014 2015
Payout ratio (lhs) Dividend yield (rhs) 2
1 Based on dividend proposal
Earnings-based dividend policy
Payout ratio of 40 – 50% of adjusted net profit
Dividend proposal 2015: € 1.15 per share
2 Based on year-end share prices
1
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Board of Executive Directors
16
Norbert Steiner CEO, Potash and Magnesium
Products business unit 1
Dr. Thomas Nöcker HR, IT, Logistics, Business
Center
Dr. Burkhard Lohr CFO
Mark Roberts Salt business unit
1 Interim management
17
Potash and Magnesium Products
Specialty fertilizers
Meat consumption Population growth Protein consumption
Limited arable land Industrial applications
High purity salts
Strong and long-standing customer relationships
Established distribution networks
Unique position in Europe
Broad product portfolio
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Why Use Fertilizers?
18
For plants to thrive they need sunlight, water and minerals
There are only few soils on earth which have a sufficient content and availability of plant nutrients to achieve high yields over a longer period without fertilization
Potash is an indispensable supplement to the natural nutrient content of soils
Compensation of the nutrient losses by harvest and other losses is necessary
“The growth and yield of plants are limited by the nutrient which is in shortest supply”1
1 Justus von Liebig, 'The Natural Laws of Husbandry', 1863
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Long-Term Dynamics Positive for Fertilizer
19
4.300 m2 2.100 m2 1.800 m2
Global population development
Arable Land per capita
Protein per capita
60 g/ day 80 g/ day 130 g/ day1)
Jahr
3.0 billion
Less arable land – but more protein consumption per capita
Each year additional 80m people need to
be fed – this equals to the population of
Germany
Available arable land per capita will
decrease at the same time
By 2050 an expanded world population
will be consuming two thirds more animal
protein than it does today
In 2050, less than half of a soccer field will be available to feed one person year round - 80 percent of future growth in crop production will come from yield advancements
driven by balanced use of fertilizers
6.9 billion 9.7 billion
1960 2010 2050
Sources: UN, World Population Prospects, 2012 Revision, UNDP, 2013; FAOStat 2014 1) FAO 2014 - forecasts based on the expected increase in animal protein
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
What Makes Us Different? Fertilizer Specialties vs. Potassium Chloride (MOP)
20
Potassium Chloride (MOP)
Fertilizer Specialties
• Can be applied universally to all crops not
sensitive to chloride and to all types of soil
• Standard product used for commodity crops
• Mainly used for special applications
(e.g. chloride sensitive crops)
• Products containing a broad range of nutrients
(e.g. potash, magnesium, sulphur)
• Premium products used for high-value crops
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Unique Portfolio Makes us More Robust
21
Broad portfolio of specialty products
MOP related/ not MOP related
Flexibility
Stability
Party following different trends and seasons
Close proximity to our main customers provide logistical advantages
Shipments to overseas customers at competitive costs from Hamburg harbor
Strong and long-standing customer relationships
Europe 59%
South America
18%
Asia 16%
Other 7%
KCL (MOP) 3.1
Industrial products
0.7
Specialties 3.0
Basis: 2015 Sales volumes in million tons
6.8
SOP
Kornkali
Kieserite
Industrial potash
Health Care & Nutrition
Basis: 2015 Revenues
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Processes Financials Investor Relations
Potash Price Comparisons
22
Q1 2012 Q1 2013 Q1 2014 Q1 2015
K+S
Bas
is: Q
1 2
01
2
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
K+S
Bas
is: Q
1 2
01
4
K+S average selling price versus selected peers
MOP gran. Europe vs. Brazil (Source: FMB)
200
300
400
500
600
200
300
400
500
600
Europe (€, Granular, cfr)
Brazil (US$/t, Granular, cfr)
US$/t €/t
2011 2012 2013 2014 2015
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
World Potash Production and Sales by Region
23 January 2016
Million tons
World potash production:
2014: 66.7 million tons 2013: 58.6 million tons
World potash sales:
2014: 68.4 million tons 2013: 58.7 million tons
Incl. sulphate of potash and low-grade potash Sources: IFA, K+S
2.7
12.0
1.0
19.4
11.7
Year 2014
7.2 6.2
22.6
4.3 14.8
33.2
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
28.7%
18.0%
14.8%
8.3% 7.8%
3.0% 3.3%
12.7%
3.4%
Supplier Structure on the World Potash Market
24 January 2016
Canpotex • Potash
Corp • Mosaic • Agrium
ICL • DSW
• CPL
• Iberpotash .
APC participation
of Potash Corp.
SQM participation
of Potash Corp.
Others • Intrepid
• Vale
• Compass
• Usbekistan
• Laos
China > 20 producers
Uralkali BPC
Belaruskali K+S
Year 2014
Sources : IFA, K+S
World Potash Sales Volumes:
2014: 68.4 million tons
2013: 58.7 million tons
Incl. potassium sulphate and potash grades with lower K2O content
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Canpotex 34%
Uralkali 16%
Belaruskali 12%
K+S 9%
ICL 8%
Others 21%
World Potash Supply and Demand
25 January 2016
1,0
00
t (
pro
du
ct)
Source: IFA, Fertecon, K+S; Incl. potassium sulphate and potash grades with lower K2O content of around 4 million tons (product)
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
Technical available capacity Sales volumes Production
Production is driven by demand despite continuous excess capacity
Capacity by producer
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Other crops 42%
Other crops 15% Other crops 7%
Fruits & Vegetables 12%
Fruits & Vegetables 7%
Fruits & Vegetables 6%
Sugar crops 5%
Sugar crops 18%
Sugar crops 5%
Oilseeds 11%
Oil palm 62%
Soybean 40%
Soybean 2 %
Rice 1%
Rice 2%
Rice 11%
Corn 13%
Corn 16%
Corn 8% Wheat 16%
Wheat 2%
0%
100%
EU-28 Brazil Indonesia
Potash Use by Crop in Selected Countries
26
Source: IFA , Estimates of Fertilizer Use by Crop in Selected Countries in 2010-2010/11, published 2013;
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Farmer Profitability of US Corn
27
67%
16%
17%
0%
100%
US Corn
Operating profit
Fertilizer costs
Other costs
thereof costs for potash: ~ 4 %
Source: USDA
in % of revenues
Expenditure on potash products accounting for just 2–4%
Earnings prospects should give the agriculture industry sufficient incentive to increase yield per hectare by using plant nutrients
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
6.2
4.3
1.0
11.7
12.0
32.5
~ 17
~ 4
0.7
68.4
2014 2010
6.7
4.9
0.8
10.8
9.7
24.9
10.2
6.1
0.5
58.3
2.7
3.1
0.3
4.1
6.0
14.6
5.4
5.5
0.2
31.0
2009
6.3
5.0
0.6
10.2
8.6
23.2
8.8
6.2
0.6
54.5
2008 2011
5.9
4.4
0.7
10.2
10.5
28.0
12.7
5.0
0.5
60.2
2012
5.6
5.1
0.7
9.1
10.5
23.4
12.0
2.8
0.4
54.8
2013
5.7
4.9
0.8
9.7
11.0
25.9
13.8
3.5
0.5
58.5
Western Europe
Central Europe / FSU
Africa
North America
Latin America
Asia
- thereof China
- thereof India
Oceania
World total
Million tons
Incl. potassium sulphate and potash grades with lower K2O content of around 4 million tons eff; Sources: IFA, K+S
World Potash Sales Volume by Region
28 January 2016
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Legacy Project – Strengthening our Global Presence
29
China India South East Asia
North America
South America
Expanding our current production portfolio in Germany with a North American production site Second source supplier
Securing a good asset base with competitive production costs
Sales and distribution through existing distribution structures of the K+S group
Exclusive outline agreement with Koch Fertilizer about supply and sales of Potash fertilizers in the US
Regional growth projects in China and SEA
Flexible multi-product strategy Located in the Heart of Saskatchewan’s Potash-Rich Basin
Regina
Two additional potash permit areas in the Esterhazy potash region
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Legacy Project Status – On Time and Budget
30
0%
50%
100%
~ 80% of CapEx spent
2013 2014 2015 2016 2017
2014 and 2015 years of main construction and
CapEx
Sustaining CapEx going
forward
Oct
ob
er 2
01
5
Feb
ruar
y 2
01
6
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Legacy - Ramp-up Curve
31
0
1
2
3
4
2011 '16 '17 '18 '20 '25 '30 '35
Production capacity in milllion t KCl/a
2.00
0.86
1.14
Phase 1 (Implementation: 2011 to 2017)
Phase 2 (Implementation: 2016 to 2023)
Outlook for Phase 3 (Implementation: 2023 to 2034)
Phase 2 – Development of secondary mining
Phase 1 – Primary mining
Outlook for Phase 3 – Expansion of secondary mining
Development of infrastructure mainly for Phases 1 + 2, preparations for Phase 3
Capacity development + ramp-up of production to 2.0 mln. t KCl/a through primary mining
Capacity expansion and ramp-up of production by 0.86 to 2.86 mln. t KCl/a
through secondary mining (share of secondary mining in total capacity: 30%)
Increase in share of secondary mining in total capacity to 50%
Potential expansion of annual capacity by 1.14 to 4.0 mln. t KCl/a
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Legacy - Competitive Production Costs
32
~ 90 CAD/ tonne
~ 65 CAD/ tonne
~ 40 CAD/ tonne
Total costs (Phase 1+2)
At full utilisation of 2.86 million tons KCl/a (Phases 1+2) No increase in prices and costs after the construction phase
Cash costs of production
Mining taxes/ royalties: Fluctuate with potash price, e.g.
400 USD ex works = ~ 60 CAD 300 USD ex works = ~ 40 CAD 250 USD ex works = ~ 30 CAD
D&A Steady state, higher in first years of production
Logistics Average from site to various target destinations
Depends on potash price
~ 225 - 255
at full utilisation
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Legacy Valuation
33
Implied Value Per Share (€)
Terminal growth rate
0% 2%
WA
CC
7% ~ 21
8% ~ 11
Conservative price assumptions for Legacy based on MOP gran. Brazil
Sustaining capex approximately CAD 100 million p.a. from 2018
34
Salt More than 14.000 applications
De-icing salt
Diversified production network and portfolio
Essential mineral for our life Food grade salt
Industrial salt
Salt for Chemical Use Presence in the most attractive de-icing salt regions
Strong consumer brands Salt 2020
Low cost production
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Why Salt?
35
Essential mineral for our life Diverse and stable salt end uses
driving continuous growth
Mineral without economically viable substitutes
Salt products typically represent only a small portion of the
production costs
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Long-term Dynamics in Salt Demand
36
De-Icing salt
Food grade salt
Population growth
Economic growth and industrialisation
Winter weather conditions
Infrastructure development
Increasing standard of living
Industrial salt
Salt for chemical use Urbanization
Low single-digit demand growth p.a. to 20181
1 Source: Roskill
Demand driven by … Product category
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Broad Variety of Application Areas
37
Main Applications:
Private households
Food processing industry
Baking industry
Condiment and preservative agent
Main Applications:
Chemical industry
Chlor-Alkali processes (→ PVC)
Polycarbonates and MDI (Isocyanat) (→ plastics, synthetic resin)
Synthetic Soda Ash (→ glass)
Main Applications:
Winter road maintenance services
Commercial users
Grit for private households
Main Applications:
Water treatment
Drilling fluids
Animal feed
Infusion and dialysis solutions
Pharmaceuticals
Preserving of fish
Dyeing works
Leather treatment
De-Icing salt Food grade salt Industrial salt Salt for chemical use
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Main Salt Suppliers Worldwide
38
Capacity in million tons (crystallised salt and salt in brine; excl. captive use)
Sal-
in
s
16 14
14
9
5 5
8
Art
yom
sol
18
Ch
ina
Nat
ion
al S
alt
10
Dam
pie
r
4
Mitsui
8
ESSA
9
Car
gill
Co
mp
ass
Am
eri
can
R
ock
Sal
t
5
Akz
o
Süd
- sa
lz
4
~ 4
Source: Roskill 2014, K+S
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Development of Salt Consumption and Production
39
Sources: K+S, Roskill 2011, 2014
North America
Europe
Asia
Other
2000 2009 2012
Production
CAGR: 2.1%
278 264
217
CAGR
2.5%
4.5%
0.8%
- 0.8% North America
Europe
Asia
Other
2000 2009 2012
Consumption
CAGR: 1.9%
220
268 275 CAGR
3.7%
4.1%
0.5%
- 0.6%
Million tons
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Salt Consumption by Product Group
40
Source: Roskill 2014
Industrial salt/ Other;
19%
De-icing salt; 13%
Food grade salt; 10%
Salt for chemical use;
58%
Global (Consumption 2012:
275 million tons)
Europe (Consumption 2012:
68 million tons)
Asia (Consumption 2012:
117 million tons)
Other (Consumption 2012:
30 million tons)
North America (Consumption 2012:
60 million tons)
28%
32%
2%
38%
19%
19%
5%
57%
10%
2%
15%
73%
34%
3%
19%
44%
CAGR (2009-2012)
13.1%
5.2%
1.3%
- 4.4%
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Our Strengths
41
Production network and Know-how
Geographical diversification of production facilities within a region and
across continents
Access to multitude of technical and geological experts within the K+S Group
Mixture of own ships, medium-term sea freight contracts and
freight hedging
Utilisation of global logistic knowledge of K+S Group
Close supply chain cooperation for most efficient group-wide sourcing
Balanced and less cyclical product portfolio
Product innovations through access to group-wide R&D network
Logistics network
Product portfolio
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Diverse Regional and Product Portfolio
42
Food grade/
Consumer
Industrial
Chemical
Normalized Revenue
Distribution
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Unrivalled Global Production Network
43
Competitive edge: Unrivalled global
production network
More than 30 assets on 3 continents allow close proximity to customers in a business that is highly freight-cost sensitive
Broad range of products due to variety of production methods Best in class supply chain assets and competence Industry best cost production in Chile
Evaluating several opportunities that will enable K+S to
grow in Asia
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Presence in Attractive De-Icing Markets
44
Indicative regional strength of winter
2010 2011 2012 2013 2014 2015
Europe North America
Great Lakes
US East Coast
Eastern Canada
Central Europe
Scandinavia
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Processes Financials Investor Relations
‘Salt 2020’ Strategy – On Track
45
211
62
118
173
266
250+ Normalized
2011 2012 2013 2014 2015 2020e
Equals more than € 400 million EBITDA
Expected EBIT development
Safety first!
Remove silo thinking
Transparency/trust
High performance and engaged workforce
Fit for the Future
Business and technical processes
Supply chain and distribution network improvements
Market share growth
New segments
New regions
Actual results
Salt 2020 Launched
Priority areas
GROWTH CULTURE EFFICIENCY
46
Production
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Potash and Magnesium Products
47
Extraction Cycle Underground – Conventional mining
Cleaning Drilling
Loading with explosives
Auger drilling
Muck pile load and dump Roof scaling
Roof bolting
Blasting after shift end
1
8
7
2 3
4
5 6
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Potash and Magnesium Products
48
Potash Processing above Ground Thermal dissolution
Flotation
Electrostatic separation (ESTA®)
25 °C 110 °C
95 °C
finely ground
crude salt
heating
undissolved residue
+ dissolved KCl
Residue (NaCl)
filtering
Potassium chloride (KCl) and Kieserite
cooling
filtering
mother brine
+ -
finely ground crude salt
conditioning
separation in a free fall separator
triboelectric charging
Residue (NaCl)
Potassium chloride (KCl) and Kieserite
flotation brine
flotation agent
air bubbles
filtering and drying
Residue (NaCl)
Potassium chloride (KCl) and Kieserite
finely ground
crude salt
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Potash and Magnesium Products
49
Legacy Project – Solution Mining (Example: Primary Mining)
Reserves / Resources 160 / 982 million t
KCl product
Depth 1,500 metres
Thickness
K2O / KCl content
Mining technique Solution mining
Environmental Impact Statement
approved for up to
4 million t KCl/a
33 metres
18% / 29%
Patience Lake
Belle Plaine
Esterhazy
In solution mining, freshwater is brought into solvent (salt) rock through a drill hole, thus creating chambers filled with a water-salt solution, so-called caverns. In a subsequent step, the saturated brine is brought to the surface level along a further pipeline.
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Potash and Magnesium Products
Saline waste water halved
50
Further investments and reduction of saline waste water according to Four-Phase-Plan
Transitional permit for deep-well injection (Werra plant) Permit until End of 2021 expected by this summer
20
14
7 1.5
1997 2006 2015
Saline waste water significantly reduced Million cubic meter
Package of measures successfully concluded Initiated 2008 CapEx: € ~400 million
Reduction of more than 65 percent since 1997
Long-term goal
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Salt
51
Main Production Methods
Rock Salt
Conventional
mining
Evaporated Salt
Recrystallisation
of purified brine
Brine
Controlled
borehole-brining
Sea-/Solar Salt
Crystallisation
from sea water
Around 70 % of worldwide salt production (more than 250 million tons) is obtained from rock salt mining
and solution mining.
Approximately 30 % of production is obtained from seawater and salt lakes.
Salt is produced in almost every country on Earth. Due to the high share of transport costs in production
costs, markets are generally regionally limited to the area around the production centres.
52
Financials
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Financing Strategy
53
40–50% of net profit
Maintain dividend
policy
Investment grade
Maintain rating
Funding further growth
Share buybacks
Special dividends
Excess cash
Key figures
Target range 2015 2014 2013 2012 2011
Net debt/EBITDA 1.0 to 1.5 2.3 1.8 1.2 0.8 0.5
Net debt/Equity (%) max. 100 55.7 42.2 30.5 24.4 19.8
Equity ratio (%) 40 to 50 51.9 50.6 45.3 51.4 50.9
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Capex
54
Cash flow from operating activities Capital Expenditure Depreciation / Amortisation
633
607
756
719
669
239
229
251
254
276
293
466
743
1,153
1,279
0 200 400 600 800 1.000 1.200 1.400
(€ million)
2015
2014
2013
2012
2011
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
From Capex to Cash
55
1 FY 2015
Capex Phase1 Cash Phase 2020
Successful ramp-up Legacy
Salt 2020
Deleverage balance sheet
Currency management
Fit for the future
Net debt:
< € 2.0 billion
Leverage:
1.0-1.5x
CapEx:
Maintenance
FCF:
Positive
EBITDA:
~ € 1.6 billion
Net debt:
€ 2.4 billion
Leverage:
2.3x
CapEx:
€ 1.3 billion
FCF:
€ -636 million
EBITDA:
€ 1.1 billion
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Operating and Free Cash Flow (adjusted)
56
(€ million)
633 607
756 719 669
217 199
49
-306
-636
2011 2012 2013 2014 2015
Operating Cash Flow Free Cash Flow (adjusted)
Significantly negative due to capital
expenditure for the Legacy Project
57
Investor Relations
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
IR Contact Details
58
E-Mail: [email protected] Homepage: www.k-plus-s.com IR-website: www.k-plus-s.com/en/ir
K+S Aktiengesellschaft Bertha-von-Suttner-Str. 7 34131 Kassel (Germany)
Martin Heistermann Investor Relations Manager
Phone.: +49 561 / 9301-1403 Fax: +49 561 / 9301-2425 [email protected]
Thorsten Boeckers Head of Investor Relations
Phone: +49 561 / 9301-1460 Fax: +49 561 / 9301-2425 [email protected]
Andrea Rach Investor Relations Assistant
Phone: +49 561 / 9301-1100 Fax: +49 561 / 9301-2425 [email protected]
Matthias Jelden Investor Relations Manager
Phone.: +49 561 / 9301-2204 Fax: +49 561 / 9301-2425 [email protected]
Patrick Kofler Senior Investor Relations Manager
Phone.: +49 561 / 9301-1885 Fax: +49 561 / 9301-2425 [email protected]
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
K+S Share
59
Key Data
WKN: KSAG88
ISIN: DE000KSAG888
Type of shares: Registered shares of no- par value
Total number of shares:
191,400,000
Trading segment: Prime Standard
Ticker symbols: Bloomberg SDF / Reuters SDFG
Quoted in the following indices MDAX DJ STOXX 600 DJ EURO STOXX HDAX CDAX Prime Allshare Index Classic Allshare Index
Covered by
Baader Bank AG Bank of America / Merrill Lynch B. Metzler seel. Sohn & Co. Bankhaus Lampe Berenberg Bank BMO Bank of Montreal Citigroup Commerzbank Credit Suisse Deutsche Bank DZ Bank
Prime Sector Chemicals Industry Group Chemicals / Commodity DJ STOXX TMI MSCI World Standard MSCI Europe Standard MSCI Germany Standard ECPI Ethical Index Global
Equinet Equita Exane BNP Paribas Hauck & Aufhäuser Institutional
Research AG HSBC Trinkaus & Burkhardt Independent Research J.P. Morgan Cazenove Kepler Cheuvreux LBBW Liberum
M.M. Warburg Morgan Stanley Nord/LB Redburn Sanford C. Bernstein Scotiabank Société Générale SRH Alsterresearch UBS Investment Research
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Shareholder Structure
60
Institutional Shareholders 61 % Retail Shareholders 39 % Freefloat 100 %
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
K+S ADR Programme
61
The K+S ADR Programme offers North American investors the opportunity to take stock in K+S. Since the ADRs are quoted in US dollars and dividends are also distributed in US dollars, this financial instrument resembles an American share closely. Two ADRs represent one K+S ordinary share. The K+S ADRs are traded in the United States under a level 1 ADR Programme in the over the counter market (OTC).
Trade on OTCQX Symbol: KPLUY CUSIP: 48265W108 Ratio: 2 ADRs = 1 Share Country: Germany ISIN: DE000KSAG888 Depositary: The Bank of New York Mellon
Benefits to North American investors
Clear and settle according to normal U.S.
standards Stock quotes and dividend payments in U.S.
dollars Can be purchased/sold in the same way as
other U.S. stocks via a U.S. broker Cost-effective means of international
portfolio diversification
Further information: http://www.k-plus-s.com/en/ks-aktie/adr/faq.html
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
K+S Bonds and Issuer Rating
62
Bond 12/2018 Bond 12/2021 Bond 06/2022
WKN A1Y CR4 A1Y CR5 A1P GZ8
ISIN XS0997941199 XS0997941355 DE000A1PGZ82
Listing Luxembourg Stock Exchange Luxembourg Stock Exchange Luxembourg Stock Exchange
Volume EUR 500 million EUR 500 million EUR 500 million
Issue price 99.777% 99.539% 99.422%
Coupon payment 3.125% 4.125% 3.000%
Maturity 06.12.2018 06.12.2021 20.06.2022
Face value EUR 1,000 EUR 1,000 EUR 100,000
Rating S&P: BBB S&P: BBB S&P: BBB; Moody's: Ba1
Issuer Rating (S&P): BBB (outlook: negative), August 2015
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Further information
63
K+S Website: www.k-plus-s.com
Financial Reports: www.k-plus-s.com/en/publikationen
Newsletter Subscription: www.k-plus-s.com/en/news/newsletter
Social Media:
Financial Calendar 2016/2017
Quarterly Financial Figures, 31 March 2016 10 May 2016
Annual General Meeting, Kassel 11 May 2016
Dividend Payment 12 May 2016
Half-yearly Financial Report, 30 June 2016 11 August 2016
Quarterly Financial Figures, 30 September 2016 10 November 2016
Report on Business in 2016 16 March 2017
More Content Available Online
K+S Group
Investment Case K+S Group Potash and Magnesium
Products Salt Production Financials Investor Relations
Forward-looking Statements
64
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 Risk Report – materialise, actual developments and events may deviate
from current expectations. The Company assumes no obligation to update the
statements, save for the making of such disclosures as are required by the
provisions of statute.