K+S Aktiengesellschaft — Investor Day (November 2021)
67 slides from K+S Aktiengesellschaft's investor day presentation, Nov 11, 2021
Slide 1: Capital Markets Day 2021 Opening Remarks
November 11, 2021 K+S Aktiengesellschaft Capital Markets Day 2021 Opening Remarks Dr. Burkhard Lohr CEO
Slide 2: Welcome
Welcome
Slide 3: REKS antitrust clearance procedure ongoing
REKS antitrust clearance procedure ongoing ▪ We continue to expect an approval can be granted. ▪ Transaction in 2021 still possible. ▪ But the review might also take longer. ▪ Therefore, 2021 outlook now only based on operating business: EBITDA 2021 ▪ We increase our expectation to €630 million (pre
Slide 4: Full reversal of impairment loss - FREP proceedings ongoing
Full reversal of impairment loss - FREP proceedings ongoing ▪ Full reversal of last year’s impairment loss ▪ Write-up mainly results from significantly more optimistic expectations for the potash business and the price development related to this ▪ Valuation of the Potash and Magnesium Products CGU
Slide 5: EBITDA more than quadrupled in Q3
EBITDA more than quadrupled in Q3 Continuing operations Revenues Q3 EBITDA Q3 Agriculture - in € million - - in € million - ▪ ASP: 300 €/tonne (Q3/20: 238 €/tonne) ▪ Sales volume: 1.76 mt (Q3/20: 1.66 mt) +31% +382% Industry+ 746 ▪ Normalized demand 121 ▪ Good early fills season with 566 de-icing sa
Slide 6: Sneak preview 2022
Sneak preview 2022 Cost inflation included: − freight rates, especially containers ▪ EBITDA of €1 billion* in reach − gas prices/energy costs − price of raw materials, e.g. for pallets, ▪ Significantly positive FCF packaging or maintenance material, also influencing capex − personnel costs 6 * exclu
Slide 7: Disclaimer
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 direc
Slide 8: Workshop: Market Outlook & Strategic Roadmap
November 11, 2021 K+S Aktiengesellschaft Capital Markets Day 2021 Workshop Market Outlook & Strategic Roadmap Dr. Burkhard Lohr CEO
Slide 9: Affordability concerns? Farm economics still attractive!
Affordability concerns? Farm economics still attractive! Futures, indexed, Bloomberg, as of 4 November 2021 U.S. Corn Farmer Profitability Outlook per acre* 300% 275% 250% 225% 200% 175% 150% 125% U.S. Soybean Farmer Profitability Outlook per acre* 100% 75% 50% Wheat Soybean Corn Palmoil → While far
Slide 10: New potash capacities necessary to meet rising demand
New potash capacities necessary to meet rising demand thousand tonnes 120,000 100,000 +3.0% (Upside scenario) +1.6% (IFA prognosis) 80,000 60,000 40,000 20,000 ,0 '00 '05 '10 '15 '20 '25e '30e Nameplate capacity New capacities Short supply Global sales volume Production 2 Source: IFA, K+S; World pot
Slide 11: Our mission statement
What is our ambition? WE ENRICH LIFE FOR Our mission statement GENERATIONS ▪ We ensure nutrition, health, and safety. ▪ We enable the success of our customers. ▪ We are pioneers in environmentally friendly and sustainable mining. ▪ We leverage our unique infrastructure for economic efficiency. ▪ We
Slide 12: The K+S core business
The K+S core business ▪ Potash and magnesium is our core business → K+S as a global supplier of plant nutrients and services in the agricultural sector ▪ In developing new business areas, we focus on the subsequent leverage of our existing infrastructure ▪ The climate strategy sets the framework for
Slide 13: Guiding principles of strategy and management focus
Guiding principles of strategy and management focus New business areas Grow the core 10% Optimize the 20% existing 70% Climate strategy Sustainability goals ▪ ROCE > WACC over a cycle of 5 years Financial ▪ At the same time, an EBITDA margin of more than 20% is targeted over this cycle targets ▪ Pos
Slide 14: Optimize the existing
Optimize the existing 70% Strategic guiding principles management focus The Group and each plant generate positive free cash flow from 2023 onwards even in the event of low potash prices and mild winters Commodity: Our Bethune and Zielitz sites are managed according to the strategic principle of cos
Slide 15: Grow the core
Grow the core 20% Strategic guiding principles management → K+S as a global supplier of plant nutrients and services focus in the agricultural sector Complementing our product portfolio with additional nutrients, biostimulants, and water- soluble products (fertigation) Establishment and expansion of
Slide 16: New business areas
New business areas 10% Strategic guiding principles management focus Establishment and further development of REKS ▪ Expansion and optimization of existing business underground waste disposal (UTD) / underground waste recovery (UTV) ▪ Commencement of business operations of tailings pile coverage Act
Slide 17: REKS: Transforming environmental obligations into a solution-oriented business model
REKS: Transforming Wathlingen Werra Zielitz environmental coverage period in years 20 50 > 50 obligations into an Hugo Neuhof-Ellers Siegfried- Giesen intelligent and solution- coverage period in years 25 50 20 oriented business model • For reasons of water, environmental and nature conservation law
Slide 18: Strategic classification of salt business
Strategic classification of salt business Global market position of the continuing K+S salt business ▪ After sale of OU Americas, reduced global relevance and reach ▪ Risk of new competitors entering the market (e.g., Ciech, Varnitsa) ▪ Continued high dependence on de-icing salt business with simult
Slide 19: Salt is no longer a core business: What does that mean?
Salt is no longer a core business: What does that mean? • Focus on operational and tactical improvements, e.g., portfolio, costs, efficiency • Major strategic considerations (market consolidation, opening up new markets, e.g., Asia) are no longer in focus 11
Slide 20: 80% reduction of GHG emissions (1990 – 2020) already achieved
K+S Climate Strategy: 80% reduction of GHG emissions (1990 – 2020) already achieved Values in Germany million t CO2 K+S -79% K+S DE -40% % 100 1,248 4.7 By a change of fuels, increase of energy efficiency 80 and closing of sites the GHG 739 emissions at K+S were 60 reduced by nearly 80% 40 between 1
Slide 21: K+S Climate Strategy
K+S Climate Strategy Short-term goal: Mid-term goal: Long-term goal: Introduction of a “K+S Reduction of our CO2 K+S supports the goals of the "Paris climate protection fund” emissions by 10% by Agreement": Climate neutrality in from 2022 to reduce our 2030 compared to 2020. 2050 can be achieved wit
Slide 22: K+S Sustainability (ESG) Goals 2030
K+S Sustainability (ESG) Goals 2030 Our sustainability goals are compensation-relevant for the Board of Executive Directors and top-level management 14
Slide 23: Excursus: Permanent storage underground (Springen)
Excursus: Permanent storage underground (Springen) Safe and sustainable use of concentrated saline water We expect to receive the approval in a timely manner Long-term disposal of liquid residues secured No need for cost-intensive pipeline to the Oberweser or to the North Sea Timely replacement of d
Slide 24: Workshop: Deep Dive: Optimize the existing and grow the core
November 11, 2021 K+S Aktiengesellschaft Capital Markets Day 2021 Workshop Deep Dive: Optimize the existing and grow the core Holger Riemensperger COO
Slide 25: Guiding principles of strategy and management focus
Guiding principles of strategy and management focus New business areas Grow the core 10% Optimize the 20% REKS existing Circular economy Fertigation 70% Digitalization Micronutrients Automation Operations excellence Biostimulants Ecological footprint Bethune ramp-up Soil health Werra 2060 Climate st
Slide 26: Priority matrix determines management focus
Priority matrix determines management focus Urgency low low/high high high Management focus optimize Probability of realization the existing Optimize the 70% grow existing low/high the core Grow the core 20% New business areas 10% low 2 Qualitative size / EBITDA-contribution 2030 2
Slide 27: Strategic direction of the potash primary sites
70% Strategic direction of the potash primary sites Commodity alignment Cost leadership, ramp up Profitability * Commodity alignment Specialties alignment Highly efficient potash site Expansion of product portfolio Neuhof high Zielitz Turn-around Winters- Hattorf hall low Unter- breizbach Bethune We
Slide 28: Bethune: Commodity site with cost leadership
Bethune: 70% Commodity site with cost leadership ▪ Growth on the way to 4mt pa is achieved through secondary mining & cooling pond technology ▪ Improvements in efficiency through automation, start of secondary mining and reduction of energy input per tonne of end product ➢ Reduction of energy and wa
Slide 29: Bethune: Ramp-up to 4mtpa
Bethune Ramp-up to 4mtpa 4mtpa 4mtpa Next Target: Stage >=1 FEL 0 3mtpa Capacity 2024 Next Target: Stage >=2 FEL 1 2.3mtpa FEL 0 FEL 2 Next Target: Stage >=4 FEL 1 FEL 3 2mtpa FEL 0 FEL 2 FEL 4 Timing: This project Completed represents a conti- FEL 1 Engineering completed by % of value FEL 3 nuous c
Slide 30: Site costs (FOB) in comparison
Site costs (FOB) in comparison Further ramp-up USD/t of Bethune to 4mt will bring Bethune -30% into the first quintile Best-in-class * K+S Bethune K+S Bethune K+S Zielitz 1st Quintile of lowest cost (mid-term) (today) (purely MOP) production volume * column width = Source: CRU Report 2019, K+S produ
Slide 31: Zielitz: Clear focus on potash products
70% Zielitz: Clear focus on potash products ▪ Focus on innovative strategic future projects and concepts: ➢ Operations Exellence (cash cost reduction) ➢ Autonomous mining and process control systems ➢ Renewable energy, H2 and CO2 infrastructure ▪ Expansion of KCl 99 to become the industry leader in
Slide 32: Werra: World's largest potash, magnesium and sulphur specialties plant
Werra: 70% World's largest potash, magnesium and sulphur specialties plant 1. Optimize portfolio ➢ Maximize CMS (Epsom Salt) ➢ Increase granulated products ➢ Increase of SOP production ➢ New specialties, incl. green fertilizers 2. Future proof ➢ Increase extraction rate ➢ Reduce process water ➢ Redu
Slide 33: Neuhof: Specialties plant for the European market
70% Neuhof: Specialties plant for the European market Increase plant lifetime 1. Efficiency ➢ Increase extraction rate ➢ Reduction in chemical consumption ➢ Increase own power generation ➢ Reduce energy usage 2. Optimize portfolio ➢ Increase kieserite production ➢ Increase granulated products 3. Fut
Slide 34: Centers of excellence for focus topics
70% Centers of excellence for focus topics Bethune Zielitz Neuhof Werra Increase extraction rates X Autonomous mining X Process automation X Energy efficiency and CO2 footprint reduction X New business models X e.g., CO2, H2, energy 10
Slide 35: Optimization of K+S salt sites
70% Optimization of K+S salt sites Generally • Focus on cost optimization; manage capex at base level; maintenance and operational improvement measures with ROI ≤ 3 years Shaping concepts for commodity vs. specialty sites • Concentration of de-icing salt volumes at low-cost sites • Optimization logi
Slide 36: Operations Excellence: Sales, Marketing and Supply Chain
70% Operations Excellence at K+S: Sales, Marketing and Supply Chain • Improve net backs (e.g. pricing, product allocation) Digitalization throughout the value chain • Production planning (margin optimized production portfolio ) Application and use of cloud data and AI-based algorithms • Sales and se
Slide 37: Share of additional EBITDA contribution by 2023
70% Share of additional EBITDA contribution by 2023 Plants Market Supply Chain Other 13
Slide 38: Grow the core: We enable farmers to achieve higher economic success
20% Grow the core: We enable farmers to achieve higher economic success Digital distribution ▪ Agronomical services ▪ Digital distributions channels (e. g. webshops) ▪ New digital business models ▪ Direct farmer access Portfolio expansion: ▪ Fertigation ▪ Micronutrients ▪ Biostimulants ▪ Soil health
Slide 39: Market attractiveness: Targeted product portfolio
20% Targeted product portfolio 1. Micronutrients Position/Strength K+S • Close to the core of our current products, - -/+ + some of which already have a position on Biostimulants the market + Fertigation • Synergetic effects with macronutrients to Micronutrients enhance plant growth/yield 2. Biostim
Slide 40: Grow the core: Contribution of the product groups
20% Grow the core: Contribution of the product groups Product groups (top line potential by 2030) Fertigation (>€ 200 million) Time Share of Micronutrients (>€ 200 million) EBITDA contribution Biostimulants (>€ 50 million) Half of the potential can be realized by 2025 Further inorganic growth potent
Slide 41: Clear prioritization of the regions
20% Clear prioritization of the regions Priority 1 Europe (Western + Eastern), Brasil • Europe is our home market The challenges of the future are to be solved here first due to high regulatory pressure • Brazil as a global agri-powerhouse and core market Priority 2 China, India, Middle East, Sub-Sa
Slide 42: Subsequent leverage of existing assets and development of new business areas
10% Subsequent leverage of existing assets and development of new business areas Renewable and green energy: Increasing use of renewable energy (wind, Carbon dioxide (CO2): solar) for our facilities CCS: underground storage (solid and gaseous) Use of avialable land on our sites CCU: utilization for
Slide 43: Q&A of both workshops
Q&A of both workshops
Slide 44: Workshop: Q3/21, Outlook & Strategic Financial Targets
November 11, 2021 K+S Aktiengesellschaft Capital Markets Day 2021 Workshop Q3/21, Outlook & Strategic Financial Targets Thorsten Boeckers CFO
Slide 45: Q3/21 EBITDA more than quadrupled YoY
Q3/21 EBITDA more than quadrupled YoY Highlights Financials (continuing operations) ▪ Q3/21 EBITDA increased to €121m (Q3/20: €25m, excluding positive non-cash, one-off effect of € 56 million) € million Q3/2020 Q3/2021 % ▪ COVID-19: Minor efficiency losses on the previous year’s Q3 level Revenues 56
Slide 46: 9M/2021 Bridges
9M/2021 Bridges EBITDA in €m 11 66 -87 35 +Higher sales volumes - Higher freight costs +Cost discipline 156 in Agriculture and Industry+ - Higher energy costs +Restructuring - Higher raw material headquarters + Mainly pricing Agriculture costs 358 177* 9M/2020 Pricing Volume FX Price related cost Ot
Slide 47: Agriculture customer segment in Q3/21
Agriculture customer segment in Q3/21 Q3/2021 USD/t EUR/t • Price hike in Brazil continued 850 800 on the back of very strong 800 demand 750 700 • Concerns about supply due to 700 Potassium 650 Sulfate US sanctions against Belarus (SOP) Potassium 600 600 Europe Chloride (MOP) Brazil • Positively inf
Slide 48: Q3 trading update: Industry+
Q3 trading update: Industry+ De-icing salt business ▪ Strong performance in Q3 ▪ Good early-fills business Pharmaceutical industry ▪ Increase after COVID-19-related declines in previous year Food service ▪ Still burdened by COVID-19-effects Chemical industry ▪ Increase after COVID-19-related decline
Slide 49: 2021 EBITDA outlook raised to €630 million
2021 EBITDA outlook raised to €630 million ▪ Significantly higher average price in EBITDA in €m continuing operations Agriculture product portfolio ▪ Sales volume in the Agriculture customer segment expected to be - Higher freight costs >7.5 million tonnes - Higher energy costs (2020: 7.3 million to
Slide 50: Sneak preview 2022
Sneak preview 2022 Cost inflation included: − freight rates, especially containers ▪ EBITDA of €1 billion* in reach − gas prices/energy costs − price of raw materials, e.g. for pallets, ▪ Significantly positive FCF packaging or maintenance material, also influencing capex − personnel costs 6 * exclu
Slide 51: Capex in upcoming years
Capex in upcoming years in m€ shift from the 500 previous year due to availability ~ 450 of material/lead + climate fund times + site strategies + cost inflation 400 -50 +50 300 200 <400 ~350 ~350 100 0 2021 2022e 2023e 2024e 7
Slide 52: Strategic financial targets
Strategic financial targets MOP gran. bulk CFR Brazil price development USD/t 1. ROCE 1200 above cost of capital through the cycle (WACC 2020: 9.4%) 1000 800 2. EBITDA margin at minimum 20% through the cycle 600 400 3. Free cash flow positive free cash flow even with 200 temporarily low potash price
Slide 53: Our new dividend policy
Our new dividend policy Current situation: Discretionary premium ▪ Still high environmental expenditures upon balance sheet structure, ▪ K+S still in restructuring phase outlook etc. Considerations: ▪ Shareholders should participate in K+S’s success through attractive dividend ▪ Strategic measures a
Slide 54: Targeted leverage ratio and rating
Targeted leverage ratio and rating • Internal KPI: Net financial debt/EBITDA • S&P and others including provisions, for example • Ability to refinance on the capital market is strongly influenced by external ratings • Leverage should be maintained over the cycle, also in phases of lower EBITDA and c
Slide 55: Q&A
Q&A
Slide 56: Workshop: K+S Climate Strategy
November 11, 2021 K+S Aktiengesellschaft Capital Markets Day 2021 Workshop K+S Climate Strategy Markus Midden Head of Technology & Energy
Slide 57: Evolvement and composition of the K+S Climate Strategy
Evolvement and composition of the K+S Climate Strategy Agenda: Contribution to 1. Energy mix: Status quo decarbonization 2. 2020 Climate Study 3. Decarbonization measures Identify Building a path risks and K+S Climate towards net 4. Climate strategy until 2050 opportunities of Strategy zero climate
Slide 58: Global energy mix K+S
Global energy mix K+S Fuels Natural gas - drying 2% 9% External heat supply 12% 43% Natural gas - CHP* External power supply 3% Approximately 10,000,000 MWh/y 31% Natural gas - boiler * Combined heat and power, also known as cogeneration 2
Slide 59: Energy price assumptions for Germany
Energy price assumptions for Germany: Short-term Mid-term Long-term Natural gas Normalization expected, mitigated by hedging Partially mitigated by hedging External power Carbon Contracts for Energy system transformation* Difference* CO2 prices Mitigated by hedging Partially mitigated by hedging * P
Slide 60: 80% reduction of GHG emissions (1990 – 2020) already achieved
80% reduction of GHG emissions (1990 – 2020) already achieved Values in Germany million tCO2 K+S -79% K+S DE -40% % 100 1,248 4.7 By a change of fuels, increase of energy efficiency 80 and closing of sites the GHG 739 emissions at K+S were 60 reduced by nearly 80% 40 between 1990 and 2020. 1.0 20 0
Slide 61: K+S Climate Strategy framework
K+S Climate Strategy framework Development of four GHG paths (scope 1+2) until 2050 Path 1 Maintenance of the status quo Path 2 Realization of measures already planned ▪ Combined heat and power plant in Bethune ▪ Electrification of vehicle fleet Path 3 Realization of further measures financed by cli
Slide 62: K+S Group: GHG reduction paths 1-4 (scope 1+2)
K+S Group: GHG reduction paths 1-4 (scope 1+2) [%] 120 ~ -10% ~ -25% 100 Bethune ramp-up 80 Combined heat and 60 power at Adjustment of Path 1 Bethune site structure Switch from Path 2 external heat 40 supply (energy Path 3 from waste) to heat Switch from natural 20 Path 4 generation from gas to pow
Slide 63: Capex costs path 3 and path 4
Capex costs path 3 and path 4* 60 CHP Bethune Electrode boilers (only path 4) Vehicle fleet Current feasibility Electric air heaters (only path 4) 40 studies indicate Photovoltaic opportunities for an Increase energy efficiency earlier start Heat pump Climate fund 20 will bring forward Ø activities
Slide 64: OPEX path 4: How much will it cost?
OPEX path 4: How much will it cost?* External power Synthetic fuels External heat Natural gas GHG costs Path 3 Power 4ct from 2035 OPEX path 3 Power 6ct from 2035 comparison: peak in 2021/22 2020 2030 2040 2050 Statement: • Costs for energy in path 3 can be handled over the time horizon • Expecta
Slide 65: What will bring us to path 4?
What will bring us to path 4? ▪ We not only have ideas but also specific technologies to achieve climate neutrality ▪ Openness to technology can offer opportunities not only for emissions reductions but also for new business areas − Carbon Capture Storage (CCS) − Carbon Capture Utilization (CCU) ▪ G
Slide 66: Summary K+S Climate Strategy
Summary K+S Climate Strategy Short-term commitment: Mid-term commitment: Long-term commitment: Introduction of a “K+S Reduction of our CO2 We support the goals of the "Paris climate protection fund” emissions by 10% by Agreement": Climate neutrality in from 2022 to reduce our 2030 compared to 2020 2
Slide 67: Q&A
Q&A
K+S Aktiengesellschaft — Investor Day (November 2021) on 6ix