K+s Ag · XETR:SDF

K+s — K+S Aktiengesellschaft — Investor Day (November 2015)

19 slides from K+s's investor day presentation, Nov 12, 2015

  1. Slide 1: From CapEx to Cash

    K+S Aktiengesellschaft From CapEx to Cash Capital Markets Day Merkers - November 12th, 2015 Dr. Burkhard Lohr, CFO

  2. Slide 2: From Capex to Cash

    K+S Group From Capex to Cash Capex Phase Cash Phase 2020 Net debt: Net debt: € 2.2 billion1) < € 2.0 billion  Successful commissioning Leverage: of Legacy Leverage: 2.1x1) 1.0-1.5x CapEx:  Deleverage balance sheet CapEx: ~ € 1.3bn billion2) Maintenance  Currency management FCF: FCF: Negative2) 

  3. Slide 3: Legacy Project Status: On Time and Budget

    Legacy Project Status On Time and Budget ~ 70% of 2014 and 2015 years Main parts awarded CapEx spent of main construction to suppliers and CapEx 100% 100% 50% 50% Sustaining CapEx going forward 0% 2013 2014 2015 2016 2017 0% August 2015 September 2015 October 2015 K+S Group 3

  4. Slide 4: Legacy Project Status: Legacy Valuation

    Legacy Project Status Legacy Valuation Implied Value Per Share (€) Terminal growth rate 0% 2% 7% ~ 21 WACC Bookvalue and lower end of DCF 8% ~ 11 Volume Volume ramp-up ramp-up (m (m metric metric tons)/ costs per tons) /costs per ton ton (CAD) (CAD)  Conservative price assumptions for Legacy based

  5. Slide 5: Balance Sheet: Well Financed for Current Situation

    Balance sheet Well Financed for Current Situation Financial instruments RCF € 1 billion (undrawn) Bond III € 500 million (expn. Dec 2018; coupon: 3.125%) Bond II € 500 million (expn. Dec 2021; coupon: 4.125%) Bond I € 500 million (expn. June 2022; coupon: 3.000%) 2012 2012 2013 2013 2014 2014 2015 2

  6. Slide 6: Balance Sheet: Net Debt Outlook

    Balance sheet Net Debt Outlook Leverage Leverage Leverage at 0.5 peak ~ 3 within target of 1.0-1.5 2011 2016 Commissioning 2020 Legacy Net financial liabilities Provisions K+S Group 6

  7. Slide 7: Mining Provisions: Influence of Discount Rates on Provisions

    Mining provisions Influence of Discount Rates on Provisions € billion 1.1 0.6 Provision increases by ~ € 0.4 billion only due to change in discount rate 31.12.2011 31.12.2015e ᴓ Discount rate ᴓ Discount rate 4.7% 3.2% K+S Group 7

  8. Slide 8: Mining Provisions: Potential Cash Outflow from Mining Provisions

    Mining provisions Potential Cash Outflow from Mining Provisions Annual cash outflow assuming actual depletion schedules of mines 2015 ~ € 20 million p.a. 2040 ~ € 30 million p.a. 2050 ~ € 40 million p.a. 2060 ~ € 40 million p.a. K+S Group 8

  9. Slide 9: Hedging Strategy: Currency Hedging Even More Crucial in Future

    Hedging Strategy Currency Hedging Even More Crucial in Future  Gross exposure of ~ USD 1 billion in 2015 from Potash business  Reduced by Legacy CapEx to be paid in USD  Net exposure in 2015 ~ USD 750 million  Legacy will approximatly double USD net exposure vs 2015 once on stream K+S Group 9

  10. Slide 10: Hedging Strategy: Our Philosophy

    Hedging Strategy Our Philosophy Principles  Hedging against currency related deterioration towards the planned cash flow and earnings  FX-derivatives are only used if an underlying transaction exists or is expected with great probability 1) Targets  Limit risks of exchange rate fluctuations on in

  11. Slide 11: Hedging Strategy: Hedging Example 2015

    Hedging Strategy Hedging Example 2015  Hedging executed for 2015 in January to October 2014  Structure:  Purchase of USD Put to limit downside  Sale of USD Call to reduce hedging costs  Plain vanilla options to fully benefit from USD strength 1,45 Purchase of USD/EUR USD-Put 1,40 @ 1,36 worst c

  12. Slide 12: Hedging Strategy: Hedging Rates

    Hedging Strategy Hedging Rates 90% of exposure already hedged 1,45 € 80% of exposure 1,35 € Worst case already hedged Best case 1,25 € 60% of exposure already hedged Worst case Best case 1,15 € Worst case 1,05 € Best case 0,95 € 2015 2016 2017 Continuous hedging already done until 2017 with very fav

  13. Slide 13: Hedging Strategy: EUR/USD Sensitivity

    Hedging Strategy K+S Group: EUR/ USD Sensitivity  EBIT impact 2016 vs 2015 ~ € 80 million ~ € 20 million ~ € -25 million 1.00 1.10 1.20 Dollar strengthens Base Case Dollar weakens K+S Group 13

  14. Slide 14: Fit for the Future: Project Setup

    Fit for the Future Project Setup Project Goals Leverage  Improve cost and organizational structures to increase peak ~ 3 efficiency of production and SG&A functions  Compensating for future cost increases Savings ~ € 500 due to  Aspiration to save in the magnitude of million Fit for the € 500 mil

  15. Slide 15: Fit for the Future: Cost Discipline Will Remain

    Fit for the Future Cost Discipline Will Remain Initiated measures unfolding € million full effect >150 >120 >120 >120 Original savings 30 30 30 30   2013 2014 2015 2016 2018 Additional savings beyond scope of Fit for the Future resolved K+S Group 15

  16. Slide 16: From Capex to Cash

    K+S Group From Capex to Cash Capex Phase Operating and Free Cash Flow Cash Phase 2020 € million Net debt: CAGR > 10% Net debt: € 2.2 billion1) < € 2.0 billion Leverage: Leverage: 2.1x1) 1.0-1.5x CapEx: CapEx: ~ € 1.3bn billion2) Maintenance FCF: FCF: Negative2) 2015e 2016e 2017e 2018e 2019e 2020e Po

  17. Slide 17: From Capex to Cash: Finance Strategy

    K+S Group From Capex to Cash Capex Phase Finance Strategy Cash Phase 2020 Net debt: Net debt: € 2.2 billion1) < € 2.0 billion Goals: Leverage: Leverage: 2.1x1)  Secure financing ability of K+S 1.0-1.5x CapEx:  Keep rating CapEx: ~ € 1.3bn billion2) Maintenance Capital Structure FCF: FCF: Negative2

  18. Slide 18: How Will Our Investors Benefit from That?

    K+S Group How Will Our Investors Benefit from That? Maintain dividend policy Maintain rating Excess cash Funding further growth 40–50% of net profit Investment grade Share buybacks Special dividends K+S Group 18

  19. Slide 19: Q&A session

    DEEP VALUE Q&A session K+S Group 19

K+S Aktiengesellschaft — Investor Day (November 2015) on 6ix