K+S Aktiengesellschaft
UBS Best of Germany One on One Conference New York13‐14 September 2016
Mark Roberts, Member of the Board of Executive DirectorsPatrick Kofler, Senior Investor Relations Manager
K+S Group 2
ContentK+S Group
K+S’ Unique Strategic PositionA
Current TradingB
OutlookC
Salt2
Potash and Magnesium Products1
K+S Group 3
Investment CaseK+S Group
Complementary Activities
Salt Business Unit
Potash and Magnesium Products Business Unit
K+S Group
Geographicreach
Broad productportfolio
Positionedfor growth
K+S Group 4
Our ProductsK+S Group
in % of sales volumes, FY 2015
Potash and Magnesium Products Salt
Industrial products
Specialties
KCl (MOP)
De‐icing
Industrial
Salt for chemical use
Food processing
46%56%
44%16%
10%
14%
8%6%
Consumer
K+S Group
From Capex to CashK+S Group
5
Capex PhaseCapex Phase Cash Phase 2020Cash Phase 2020
Net debt< € 2.0 billion
Leverage1.0‐1.5x
CapexMaintenance
FCFPositive
EBITDA4
~ € 1.6 billion
Net debt1€ 2.9 billion
Leverage (LTM)3.6x
Capex2€ 1.3 billion
FCFNegative
EBITDA3
€ 0.5‐0.6 billion
Keeping cost discipline above and beyond “Fit for the Future”
Successful implementation of “Salt 2020“
Strategy
Enhancing portfolio of
higher yielding products
Managing environmental challenges
particularly in Germany
Successful commissioning
of Legacy
Management Agenda
Fundamentals of the potash business expected to improve4
1 Q2/16 2 2015
3 Guidance 20164 Main assumptions: Unaffected potash production in Germany and Canada; Potash price level of summer 2015;
USD/EUR 1.10; normal winters in North America and Europe.
K+S Group 6
ContentK+S Group
K+S’ Unique Strategic PositionA
Current TradingB
OutlookC
Salt2
Potash and Magnesium Products1
K+S Group 7
Long‐Term Dynamics Positive for FertilizerPotash and Magnesium Products
4.300 m2 2.100 m2 1.800 m2
Global population development
Arable Landper capita
Proteinper 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, only roughly a quarter 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 20141) FAO 2014 ‐ forecasts based on the expected increase in animal protein
K+S Group 8
Utilizing Entire Range of Minerals in Complex DepositsPotash and Magnesium Products
KCl 16.1%
Kieserite 20.4%
Residue 63.5%
e.g. Neuhof 2014
Mineral extraction
Reducing specific costs of our MOP products
KieseriteKieserite
Korn‐KaliKorn‐Kali
Magnesia‐KainitMagnesia‐Kainit
MOPMOP
K+S product offering
SOPSOP
Extending our product offering
$$$
Raw Salt
KCL (MOP)3.1
Industrial products0.7
Specialties3.0
Basis: 2015 Sales volumes in million tons
6.8
SOPSOP
Korn‐KaliKorn‐Kali
KieseriteKieserite
Industrial potashIndustrial potash
Health Care & Nutrition
Health Care & Nutrition
Fertilizer Industrial Applications
Health Care & Nutrition
K+S Group 9
Leading Position in EuropePotash and Magnesium Products
Europe
South America
Asia
Other regions
K+S Group 10
Q12012
Q12013
Q12014
Q12015
Q12016
Bas
is: Q
120
12
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Basis: Q120
14
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 2016
K+S K+S
Potash and Magnesium ProductsOur Unique Portfolio Makes Us More Robust
K+S Group 11
Measures for the short‐termPotash and Magnesium Products
Commissioning of KCF(1)
Further reduction of saline wastewater by
1.5 million m3
Underground storage of saline
wastewater in own mines
Underground storage of saline wastewater in 3rdparty premises
Bunch of further measures
Identification and implementation of measures to bridge 2016/2017
(1) Kainite Crystallization and Flotation facility
20
14
10
7 7 75.5
1997 2006 2012 2015 2016 2017 Beyond
Wastewater disposal in million m³
K+S Group 12
Strengthening our Global Presence Legacy Project
ChinaIndiaSouth 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
K+S Group 13
Commissioning on trackLegacy Project
No injuries 1 of 5 crystallizers dropped Impact on ramp‐up:
Commissioning continues
Production of first ton delayed into Q2/17
Production volume 2017 below previously planned (up to 1 million tons)
Capacity of 2 million tons p.a. will be reached by the end of 2017 as planned from today’s point of view
K+S Group 14
ValuationLegacy Project
~90
2017 2018 2019 2020 2021 2022 2023Co
stsp
er to
n (CAD
)
Volume ramp‐up (m metric tons) /costs per ton (CAD)
Production costs Logistics costs Mining taxes/ royalties
<1 ~2 ~2.1 ~2.3 ~2.4 ~2.6 ~2.9Sales volumes (m metric tons)
Implied Value Per Share (€)
Terminal growth rate
0% 2%
WAC
C
7% ~ 21
8% ~ 11
Volume ramp‐up (m metric tons)/ costs per ton (CAD)
Main assumptions:
Unaffected potash production Potash price level of summer 2015
(time of release of guidance)
K+S Group 15
Acquisition in ChinaPotash and Magnesium Products
Huludao Magpower Fertilizers Co., one of the largest producers of synthetic magnesium sulphate (SMS)
SMS is used as fertilizer for oil palms, soybeans and sugar cane as well as for industrial applications
Strengthen our competitive position in specialties
Improved access to growth markets of South‐East Asia and China
Scalable low cost production assets
Huludao
K+S Group 16
ContentK+S Group
K+S’ Unique Strategic PositionA
Current TradingB
OutlookC
Salt2
Potash and Magnesium Products1
K+S Group
Salt
17
Low single‐digit demand growth p.a. to 20181
1 Source: Roskill
Demand driven by … Product category
Long‐Term Dynamics in Salt Demand
De‐Icing
Food processingPopulation growth
Economic growth andindustrialisation
Winter weather conditions
Infrastructure development
Increasing standard of living
Industrial
ChemicalUrbanization
Consumer
K+S Group
Inevitable for lifeSalt
18
Main Applications: Food processing
industry Baking industry Condiment and
preservative agent
Main Applications: Chemical industry Chlor‐Alkali
processes (→ PVC) Polycarbonates ,
MDI (Isocyanat)(→ plastics, synthetic resin)
Synthetic Soda Ash (→ glass)
Main Applications: Winter road
maintenance services
Commercial users Private
households
Main Applications: Water treatment Drilling fluids Animal feed Infusion, dialysis
solutions Pharmaceuticals Preserving of fish Dyeing works Leather treatment
De‐Icing Food processing Industrial ChemicalConsumer
Main Applications: Table salt Dishwasher care Water softening Pool chlorination Body care
K+S Group 19
Unrivalled Global Production NetworkSalt
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
Ensuring close proximity to customers Broad range of products due to variety of production methods Best in class supply chain assets and competence Industry best cost production in Chile
Expansion into Asia‐Pacific:
Project Launch in Australia
K+S Group 20
Diverse Regional and Product PortfolioSalt
NormalizedRevenue
Distribution
Consumer
Industrial
Food processing
Salt for chemical use
1 De-icing adjusted to normal winter
K+S Group 21
Presence in Attractive De‐Icing Markets Salt
Indicative regional strength of winter
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
Europe North America
Great LakesUS East Coast
Eastern Canada
Central Europe
Scandinavia
K+S Group 22
‘Salt 2020’ Strategy – On TrackSalt
211
62
118
173
266
250+Normalized
2011 2012 2013 2014 2015 2020e
Equalsmore than€ 400 millionEBITDA
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 CULTUREEFFICIENCY
K+S Group 23
Expansion into Asia‐Pacific: Project Launch in AustraliaSalt
“We want this project to give a boost to our planned expansion into the Asian markets. We see big potential there, and want to sustainably participate in the
expected growth there in the future. The purchase of the licenses is the foundation to achieve this.” Mark Roberts, CEO Salt
Component of “Salt 2020” strategy Initial focus on obtaining necessary
permits CapEx estimate of around € 225 million Estimated production capacity of 3.5
million tons p.a. Main customers in the chemical industry
in Asia Possible production start in 2022
K+S Group 24
ContentK+S Group
K+S’ Unique Strategic PositionA
Current TradingB
OutlookC
Salt2
Potash and Magnesium Products1
K+S Group 25
P&LK+S Group
€million FY/14 Q1/15 Q2/15 Q3/15 Q4/15 FY/15 Q1/16 Q2/16
Revenues 3,822 1,377 914 891 993 4,175 1,096 732
EBIT I 641 317 179 132 154 782 218 15
t/o insurance gain 36 0 0 0 0 0 0 0
EBIT I w/o insur. gain 605 317 179 132 154 782 218 15
Margin 16% 23% 20% 15% 16% 19% 20% 2%
Financial result ‐126 ‐40 ‐14 ‐7 +27 ‐34 ‐13 ‐15
EBT, adjusted 515 276 166 125 181 748 205 0
Tax rate, adjusted 29% 28% 28% 29% 25% 28% 28% 29%
Net income, adjusted 367 198 119 89 136 542 148 0
EPS, adjusted 1.92 1.04 0.62 0.46 0.71 2.83 0.77 0.00
The adjusted key figures only include operating forecast hedges of the respective reporting period in EBIT I. In addition, related effects on deferred and cash taxes are also excluded.
K+S Group
2013 2014 2015 2016
>150
30
>180
26
Cost Discipline Will Remain HighK+S Group
on track
€ million
“Fit for the Future” on track More than 2/3 of total
aspirations achieved Measures implemented will
continue beyond 2016 with full effects until 2018
Further top‐down measures beyond “Fit for the Future” initiated Effects coming through in
2017 and 2018
K+S Group 27
Cash Flow and Balance SheetK+S Group
€million FY/14 Q1/15 H1/15 9M/15 FY/15 Q1/16 H1/16
Operating cash flow 707 301 433 630 669 294 359
‐ Investing cash flow(pre sale/ purchase of securities)
‐1,013 ‐203 ‐532 ‐894 ‐1,305 ‐243 ‐537
Adjusted free cash flow ‐306 98 ‐93 ‐264 ‐636 50 ‐178
CapEx 1,153 200 555 905 1,279 280 643
Net debt (‐) ‐1,626 ‐1,602 ‐2,019 ‐2,224 ‐2,400 ‐2,367 ‐2,860
t/o Net financial debt (‐) ‐591 ‐440 ‐811 ‐1,005 ‐1,364 ‐1,315 ‐1,756
Net debt/ EBITDA (LTM) 1.8 1.6 2.0 2.1 2.3 2.5 3.6
Equity ratio 51% 52% 52% 51% 52% 52% 49%
K+S Group 28
Debt ProfileK+S Group
Bond I € 500 million(expn. June 2022; coupon: 3.000%)
Bond II € 500 million(expn. Dec 2021; coupon: 4.125%)
Bond III € 500 million(expn. Dec 2018; coupon: 3.125%)
RCF € 1 billion
Debt Instruments
2016 2017 2018 2019 2020 2021 2022
Schuldschein € 700 million(3-yrs: € 295 million; 5-yrs: € 365 million; 7-yrs: € 40 million)
K+S Group 29
Potash and Magnesium ProductsK+S Group
(1) (Revenues – EBIT) / Sales volumes (2) Excluding OpEx Legacy (3) Excl. anticipated insurance payment
€ million FY/14 Q1/15 Q2/15 Q3/15 Q4/15 FY/15 Q1/16 Q2/16
Revenues 1,884 608 501 471 511 2,091 461 371
EBIT I 489 183 144 92 127 546 102 15
t/o insurance gain 34 0 0 0 0 0 0 0
EBIT I w/o insurance gain 455 183 144 93 127 546 102 15
Margin 24% 30% 29% 20% 25% 26% 22% 4%
t/o Legacy OpEx ‐37 ‐13 ‐20 ‐15 ‐20 ‐68 ‐19 ‐21
Avg. selling price (€/t) 274 314 310 310 292 307 272 250
Sales volumes (million tons) 6.87 1.94 1.61 1.52 1.75 6.82 1.69 1.48
FY/14(3) Q1/15 Q2/15 Q3/15 Q4/15 FY/15 Q1/16 Q2/16
Costs per ton (1,2) 208 212 209 239 208 217 201 226
K+S Group 30
SaltK+S Group
€million FY/14 Q1/15 Q2/15 Q3/15 Q4/15 FY/15 Q1/16 Q2/16
Revenues 1,779 727 374 382 442 1,925 595 319
EBIT I 173 142 43 43 39 266 123 5
Margin 10% 20% 11% 11% 9% 14% 21% 2%
Sales volumes (million tons) 23.6 9.1 3.6 3.8 4.7 21.1 7.1 2.9
De‐icing 14.4 6.9 1.2 1.5 2.3 11.9 4.9 0.6
Non de‐icing 9.2 2.2 2.4 2.3 2.4 9.2 2.2 2.3
Average selling prices (€)
De‐icing 53 65 65 62 67 65 64 53
Non de‐icing 104 119 120 124 118 120 122 123
K+S Group 31
ContentK+S Group
K+S’ Unique Strategic PositionA
Current TradingB
OutlookC
Salt2
Potash and Magnesium Products1
K+S Group
K+S GroupGuidance FY 2016: EBIT I Bridge
32
Actual2015
Volume‐/price
Missing deep‐well injection
permit
Othereffects(net)
Fit for theFuture
2016e
782
€ million
200
300
2016e EBIT range
Main effects:‐ OpEx Legacy‐ Higher D&A
Main assumptions:Potash• Lower YoY potash ASP• Hydrological normal year• Execution of countermeasures• Sales volumes 6.2‐6.4 million tons
Salt• Moderate decline of de‐icing volumes• Slight increase of non de‐icing volumes
may not offset this
K+S Group
K+S GroupDividend Increase of 28% for 2015
33
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)
Earnings-based dividend policy
Payout ratio of 40 – 50% of adjusted net profit
Dividend 2015: € 1.15 per share(2014: € 0.90 per share)
1) Based on year-end share prices
1)
K+S Group 34
IR Contact DetailsK+S Group
E-Mail: [email protected]: www.k-plus-s.comIR-website: www.k-plus-s.com/en/ir
K+S AktiengesellschaftBertha-von-Suttner-Str. 734131 Kassel (Germany)
Laura SchumberaJunior Investor Relations ManagerPhone.: +49 561 / 9301-1607Fax: +49 561 / [email protected]
Thorsten BoeckersHead of Investor RelationsPhone: +49 561 / 9301-1460Fax: +49 561 / [email protected]
Andrea RachInvestor Relations AssistantPhone: +49 561 / 9301-1100Fax: +49 561 / [email protected]
Martin HeistermannSenior Investor Relations ManagerPhone.: +49 561 / 9301-1403Fax: +49 561 / [email protected]
Patrick KoflerSenior Investor Relations ManagerPhone.: +49 561 / 9301-1885Fax: +49 561 / [email protected]
K+S Group 35
Forward‐Looking StatementsK+S Group
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 of the Annual Report – materialize, 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.
K+S Group
K+S Group 37
K+S Group
K+S Aktiengesellschaft · Bertha-von-Suttner-Straße 7 · 34131 Kassel | Germany · Internet: www.k-plus-s.comInvestor Relations · phone: +49 (0)561 / 9301-1100 · fax: +49 (0)561 / 9301-2425 · email: [email protected]
Financial Calendar 2016/17: 10 Nov: Q3/16 – 16 Mar: FY/16
K+S Share• WKN: KSAG88• ISIN: DE000KSAG888 • Ticker-Symbols:
Bloomberg SDF / Reuters SDFG
K+S ADR• CUSIP: 48265W108 • ADR Ticker-Symbol:
Bloomberg: KPLUY / Reuters: KPLUY.PK
K+S Bond 06/2022• WKN: A1P GZ8• ISIN: DE000A1PGZ82
K+S Bond 12/2018• WKN: A1Y CR4 • ISIN: XS0997941199
K+S Bond 12/2021• WKN: A1Y CR5• ISIN: XS0997941355