Capital Markets Day Morton Salt - K+S Group · Experience growth. Capital Markets Day Morton Salt...

Experience growth.

Capital Markets DayMorton Salt

Mark RobertsCEO of Morton Salt

Berlin, 8 December 2010

Capital Markets DayMorton Salt

Mark RobertsCEO of Morton Salt

Berlin, 8 December 2010

K+S Group 1December 2010

The K+S salt presence in North America consists of two highly efficient and profitable entities: Morton Salt and International Salt Company (ISCO).

Together with our sister company ISCO, we are the North American market leader in consumer and speciality salt, industrial salt, and de-icing salt.

North America’s favourite consumer salt brands “The Morton Umbrella Girl” & “Windsor Castle”.

6 rock salt mines, 7 solar evaporation facilities and 10 vacuum pan operations as well as 62 salt stockpiles and 61 distribution centres.

Annual salt production capacity of 13.1 million tonnes.

2,900 employees – Average tenure ~19 years.

Headquartered in Chicago; founded in 1848.1

Corporate OverviewMorton Salt


The only North American salt producer with an evenly balanced product & geographic portfolio.

The Consumer business is divided into three product groups:• Table and Speciality• Water Softening• Packaged Ice Melt

The Ice Control business is divided fairly evenly between the U.S. and Canada and services the markets from over 60 strategically placed stockpile sites.

The Industrial business services dozens of end-use markets and relies on Quality, Reliability and Service to support our value proposition.

The overall business is recession-resistant.

2

Business Overview

Revenues by Market

Morton Salt

Consumer46%

Ice Control

31%

Industrial23%

2009

Distribution of business into three significant parts provides a “three legged stool”, unmatched by any N.A. salt competitor.

K+S Group 3December 2010 3

Rock salt (6)

Vacuum salt (10)

Production methodWeeks Island, LA

Glendale, AZ

Fairport,OH

Inagua, BH

Grantsville, UT

Grand Saline, TX

Hutchinson, KS

Silver Springs, NY

Windsor, ON

Newark, CA

Perth Amboy, NJ

Port Canaveral, FL

Long Beach, CA

Morton SaltProduction Sites in North America

Mines Seleine, QC

Pugwash, NSOjibway, ON

Manistee, MI

Rittman, OH

Regina, SK

Lindbergh, AB

Solar evaporation salt (7)


Morton is one of only seven companies with corporate OSHA VPP (Voluntary Protection Program) status – an employee-led safety initiative:• Morton Salt• Delta Airlines• General Electric• Dow Chemical• Jacobs Engineering Group, Inc.• Fluor Corporation• Parsons Corporation• The Washington Division of URS Corporation

44

SafetyMorton Salt

1,5

1,6

1,7

1,8

1,9

Morton (YTD Oct.) N.A. Salt Industry (Jan-Jun)

0,29

0,30

0,31

0,32

0,33

0,34

0,35

Morton (YTD Oct.) N.A. Salt Industry (Jan-Jun)

Occupational Illness & Injury (OII) Rates*

Lost Time Injury (LTI) Rates*

* per 200,000 working hours

Morton Salt is the industry leader when it comes to safety in the workplace.

Our credo - “Nothing is more important to Morton Salt than health and safety, not production, not sales, not profits.”


The BrandMorton Salt

The Morton Umbrella Girl is nearly 100 years old.

Virtually universal awareness (95%) among American consumers.

Evokes feelings of quality, trust and purity.

87% of consumers attribute high quality and reliability to the brand.

75% of shoppers at a leading mass merchan-diser prefer to buy System Saver II vs. 4% for next leading brand.

The Morton brand is an American Icon

Provides a strong foundation for price premium, product innovation and product line extensions.

Sources: Morton Tracking Study Wave 3, DDB 2004; Water Softener Salt Channel Assessment Report, Market Tools May, 2010.


Morton SaltConsumer Products – Advertising & Promotion

New, overarching ad/promotional campaign will further build up the brand across all product lines.

Utilize the Umbrella Girl & Morton name as a true differentiator.

Underlying theme – “She Makes Everything Better”.

Unexpected events with The Girl will generate interest, conversation, and buzz.

Increased focus on social media space will help connect with younger consumers.

Integrated advertising, promotion, web and social media will work harder to make The Girl relevant.


Consumer Products: Clear Market Leader inTable and Speciality Salts

Morton Salt

80%64% 56% 54%

14% 21% 22%

17% 22% 23% 24%3%

0%

20%

40%

60%

80%

100%

2005 2009 2010e 2011e

Round Cans Sea Salt Kosher Salt

P/L16%

Salt for chemical use 6%

Cargill4%

MCCormick30%

Morton Salt35%

Other 16%

Table & Speciality (Dollar shares)Market Leader in Table & Speciality

% of Sales Dollars

Shift towards higher profitability productsSource: The Nielsen Company, Grocery Channel, 4 wks ending, 10/9/10.

Morton Salt with 35% share• Morton is #1 in the high-growth / high-margin

sea salt category.• Morton is #1 in the high-growth / high-margin

kosher salt category.


Consumer Products: Clear Market Leader inWater Softening

Morton Salt

P/L 6%

Compass4%

Cargill31%

Morton Salt52%

Other 1%

Water Softening (Dollar shares)Market Leader in Water Softening

Morton is the market leader in water softening with 52% share of pellets.

Morton outperformed competition on all top drivers of brand loyalty.

• Morton water softening salt commands 84% loyalty.

• 73% of users agree that Morton is the authority on water softening salt.

• 71% are satisfied that Morton has the mostadvanced formula.

• 68% say that Morton is the leader and the most popular brand.

Sources: 2008 McKinsey Study on Water Softening; AC Nielsen Homescan 2009 Share of Requirements; Salt Institute C’10 Jan-June $ share; Morton estimate of competitive breakdown.


C'07 C'08 C'09 C'10 (plan)

Consumers prefer Morton branded ice melters2 to 1 over other leading brands.

Service is paramount – Morton awarded the Walmart “Supplier Collaboration Award of the Year” for service performance in ’09/’10 season.

Great synergies with ISCO.

Morton Ice Melt Blend Volume Growth (tonnes)

1010

Consumer Products: Packaged Ice Melt GrowthMorton Salt

CAGR 145%

Scotwood13%

Compass31%

Cargill12%

Morton Salt25%

Other19%

Ice Melters (Dollar shares)Ice Melters

Sources: Internal Estimates Based on BCG Analysis 2009 and The Nielsen Company Data; Understanding the Purchase Dynamics of Ice Melting Products, DDB 2007


MidwestCanadaUSEC

The public safety and economic benefits of road salt use are clear.

Morton Salt

Long-term average ice control shipments

Governmental De-icing Market – North America

Morton/ISCO – Even distribution of volume between three key markets.

35%

28% 37%

Winter weather congestion affects 70% of U.S. roadways.

Roadway de-icing reduces crash frequency by 88.3 percent.

De-icing decreases the average cost of each crash by 10 percent.

During the first four hours after salt is applied, the direct road users’ benefits (i.e. increased mobility, productivity & hourly worker compensation) are $6.50 for every $1.00 spent on direct maintenance costs for the operation.

A one-day major snowstorm can cost a state $300-$700 million in both direct and indirect costs (i.e. reduction in commerce & associated tax revenue).

Sources: Marquette University and Global Insight Studies / Salt Institute


Governmental De-icing Market – North AmericaMorton Salt

Morton & ISCO’s combined broad production & stockpile footprint is geographically attractive to high snowfall / high population density markets.

With the addition of SPL’s high capacity & low fixed cost supply sources (from Chile and Brazil), there is now ample capacity to meet the near-term needs of a bulk de-icing market which is growing at 1-2% per year.

The newly combined production footprint will be re-balanced annually to meet the anticipated seasonal market demand.


Governmental De-icing Market – North AmericaMorton Salt

-14

21

10 11

-16-22

107

-7

-50

-40

-30

-20

-10

0

10

20

30

40

50

'01/'02 '02/'03 '03/'04 '04/'05 '05/'06 '06/'07 '07/'08 '08/'09 '09/'10

%

US East CoastMidwestCanadaWeighted Average

Seasonal governmental ice control sales volumes compared with 9-year normalized volumes

The three North American regions served by K+S provide a nice winter business balance with a high chance to balance each other out. No other North American salt company has the same presence.

On the basis of the whole salt division, the European de-icing region adds even further diversification.

Less overall volatility provides a more predictable cash flow.

The broad K+S production network ensures supply in order to capitalize on the ‘up’ winter regions.


Business Weather IntelligenceMorton Salt

96 Metro AreasSnowfall

Comparison

0

500

1000

1500

2000

2500

3000OCT NOV DEC JAN FEB MAR

Acc

umul

ated

Am

ount

s (In

ches

)

0

200

400

600

800

1000

1200

Mon

thly

Am

ount

s (In

ches

)B

ar G

raph

s

2007-2008 Monthly Snowfall 2008-2009 Monthly SnowfallNormal Monthly Snowfall LR 2009-2010Accumulated Season 2007-2008 Accumulated Season 2008-2009Accumulated Normal Season LR 2009-2011

Morton takes a unique, pro-active approach towards the weather impact on business by partnering with Planalytics.• Provides timely, actionable insights into impending winter

weather demand patterns – 2-week view.

• Facilitates production and logistics planning adjustments.

• Adds value to our product offering.

• Planalytics forecast accuracy up to 90% over 1-2 week view.

Utilizing BWI • Planalytics automated daily snow alerts provide projected

snowfall by day AND a detailed listing of when and how much by customer location – driving replenishment orders.

• Alerts sent to our sales group and key customers who then make decisions on pushing product to highest impact locations.

• Increases sales, minimizes unsold inventory costs, speeds replenishment, sets Morton apart from competition as superior vendor.


Industrial ProductsMorton Salt

Food ProcessingDistributorChemicalOilHealth CareAGGov. Muni. & Inst.UtilitiesSalt CompaniesOtherDetergentIce MeltersPaperHide ProcessingMisc. IndustriesTextile

Dendritic Rock Pretzel

KosherHG Blending KCl

Solar

Diverse group of markets served.

Focus on Quality, Reliability and Service to support value proposition.• Every industrial product produced at a

minimum of 2 plants.

• Broad production footprint provides unmatched service levels.

Highly skilled sales force, most with technical degrees.

Recently added Kosher salt capacity will allow the Industrial sales team to recapture market share previously shed to support CPG growth.

Morton offers the broadest industrial salt product range in the salt industry.


Industrial ProductsMorton Salt

0

50

100

150

200

250

300

2004 2005 2006 2007 2008 2009 2010e

Industrial Products group focused on obtaining a price premium for providing the Quality, Reliability and Service that support value proposition.

Future profitability will be bolstered by the same shift to higher-margin sea salt and kosher salt as seen in the consumer business.

Although dietary sodium reduction is a pressing topic, many food processors have already made formulation changes without fanfare as low-sodium means “low-taste” to consumers.

Industrial Products 2004 -2010e Gross Profit Contribution

2004 = 100%%


Low Sodium DiscussionMorton Salt

Beyond providing flavour, salt plays a key role in food – ensuring texture and preservative properties.The science behind the push for lowered dietary sodium levels is mixed:• USDA is contemplating a reduction in the recommended

daily sodium consumption levels from 2,300 mg/day to 1,500 mg/day.

• However, recent medical studies including one from the Harvard School of Public Health (November 2011) suggest that humans consume a very consistent level of sodium regardless of the sodium content in processed foods.

Regardless of the science, Morton is playing a pro-active role in providing information and solutions, both to industry and consumers.• Morton is offering Potassium Chloride and Potassium

Chloride blends, and will continue to work with K+S KALI to combine efforts in this area.

• Morton is offering “salt savvy” messaging on table salt products – suggesting responsible salting while offering product alternatives.


Post-Closing Business Integration IssuesMorton Salt

Ongoing

Post-Closing Integration Steps & Projects• Timely financial reporting in keeping with K+S & IFRS reporting standards.

• Inclusion of Morton into K+S scheduling and budgeting structures/processes.

Business Integration• Reorganization of roles/responsibilities between ISCO and Morton in North America.

• Identification and implementation of best practices between the various salt companies.

Carve-Out of “non-salt“ activities• Establishment of necessary legal entities as prerequisite for the transfer and ultimate

elimination of former Morton “non-salt“ activities.

• Return of shell company with environmenal risks to Dow Chemical, occurred on 1 November 2010.

IT-Integration• Integration of Morton into K+S IT platform will bring benefits.

• Easier flow of financial data for consolidation and budgeting purposes.

• Improved back-end reporting will provide more timely information for management of business.

• Platform “go-live“ for Morton Canada expected mid-2011, Morton USA mid-2012.


Business SynergiesMorton Salt

Morton Salt valuation was made assuming no synergy savings; however, there are in fact considerable and sustainable synergies.

~ $4 million

~ $5 million

~ $15-$20 million

Quick wins.• Joint purchase of Calcium Chloride.

• Morton supplying ISCO water softening and other specialities.

• Morton (Inagua) supply to ISCO in winter ‘09/’10.

Identified, in synergy realization phase.• Optimization of logistics flow for U.S. East Coast.

• Earnings potential due to reorganization of salt in North America.

Earnings potential from other efficiency projects mid-term view.• Best Practices (mining/technology).

• Procurement synergies (i.e. bags, pallets, ingredients).

• Energy (gas/coal).

• Transportation (truck / barge / container / vessel).


Morton SaltPromising Outlook ahead within the K+S Group

From a global perspective, Morton Salt broadens the geographic footprint of a weather-impacted salt business.

In keeping with the K+S Vision and Mission, Morton Salt will integrate its long-term strategic plan into that of the Business Unit Salt.

There are real, as yet unexplored synergy opportunities.• Best practice sharing.

• Mining techniques.• Safety programs.• R&D - new product development.

• Food and Pharma grade KCl sales – leverage for Morton’s sales force & market knowledge.• Health & Beauty market – leverage for Morton’s strong brand identity.

K+S’ Salt business creates a strong North American platform and knowledge base from which other growth opportunities can be launched. We have a high level of regional competence in transportation, solution mining, regulatory issues, etc.

The traditional Morton Brand has a bright future …

K+S Gruppe 21

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

K+S Gruppe 22

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: [email protected]: 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: [email protected]: www.k-plus-s.com

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