Thorsten Boeckers, Head of Investor Relations Britta ...

K+S Aktiengesellschaft

Exane BNP Paribas SRI Conference 2014 Paris, 25 November 2014

Thorsten Boeckers, Head of Investor Relations

Britta Sadoun, Sustainability

K+S Group 2

K+S’ Unique Strategic Position A.

Content

K+S Group

Current Trading B.

Outlook and Summary C.

Salt 2.

Potash and Magnesium Products 1.

K+S Group

Selective presence in global growth markets

Investment case

K+S Group

Production network on three continents in Salt

Legacy Project on track to enhance regional mix and product portfolio

Unique position in Europe and specialty fertilizers

3

Balanced portfolio with broad exposure

Presence in most attractive de-icing salt regions

Strong brand with Morton Salt in North America

Return to 40-50% payout would bring yield back to above historical level

K+S Group 4

Focus on potash and salt K+S Group

Complementary Activities (Revenues 2013: € 159 million; EBIT I 2013: € 25 million)

Salt

Business Unit

Potash and Magnesium Products

Business Unit

Revenue / EBIT I in € million Revenue / EBIT I in € million

K+S Group Revenues 2013: € 3.95 billion

EBIT I 2013: € 656 million

1,729 1,710 1,485 1,751

238 211 62 118

2010 2011 2012 2013

1,867 2,134 2,291 2,038

476 740 771 553

2010 2011 2012 2013

K+S Group

Broad range of applications for our products

K+S Group

Salt

De-icing salt (61%)


KCl (MOP) (47%)

Industrial product (11%)

5

Industrial salt (22%)

Food grade salt (6%) Salt for chemical use (11%)

Specialties (42%)

Attractive end market dynamics drive volume growth and pricing

% of sales volumes of FY 2013

http://www.krv.de/images/rsgallery/original/7-KRV-PE-Vers-WKT-2.jpg

K+S Group

Cost Reductions will be Sustainable

K+S Group

Cost reductions

versus planning values (schematic representation)

2016

a good

€150 mn.*

in the magnitude of

€ 500 million*

● Our goal is to realise sustainable cost

reduction by 2016.

● The Potash and Magnesium Products

business unit contributes more than half, the

Salt business unit about a third of the savings.

● ~70% of the target for 2014 has already been

achieved.

* versus corresponding plan values as per mid of 2013

6

Examples:

• Redesign of packaging material of

various products (Salt)

• Moving storage facilities from Antwerp

to Hamburg harbour (Potash)

K+S Group


Content

K+S Group

Current Trading B.


Salt 2.


7

K+S Group

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/ day*

Jahr

Source: UN, World Population Prospects, 2012 Revision, UNDP, 2013; FAOStat 2014; *FAO 2014 - forecasts based on the expected increase in animal protein

Long-term dynamics positive for fertilizer

8

3.0 bill.

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 bill. 9.6 bill.

1960 2010 2050

K+S Group

K+S Group

Canpotex

producers

34%

Uralkali

16% Belaruskali

12%

K+S

9%

ICL

8%

Others

21%

World potash supply and demand 1,0

00 t

(pro

duct)

Source: IFA, Fertecon, K+S; Incl. potassium sulphate and potash grades with lower K2O content of around 3 million tonnes (product)


9

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14e

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

3,2

3,0

0,7

KCL (MOP) Specialties Industrial products

Our unique positioning makes us more robust


Diversified product portfolio Solid hometurf and growth regions

Europe 55%

South America

21%

Asia 17%

Other 8%

• Established

logistics

network

• Fragmented

customer base

• Country /

regional

diversification

• Selective

approach

• Competitive

distribution

costs

Revenues Sales volumes in million tonnes

2013:

6.9

10

More than potash

Non-potash ~20%

Potash containing

~80%

Sales volumes

Unique strategy

Diversified product and regional portfolio

Unique position in Europe and selected overseas

regions

Logistical advantage in Europe with established

distribution network

Fertilizer specialties and industrial products

enhance robustness

Strong and long-standing customer relationships

Track record of being a reliable supplier

K+S Group

Growth

Participate in growth of the world

potash market

Production Costs

Improved average cash costs

Increased share of variable costs

Average Mine Life

Substantial extension of average

mine life

Diversification

Broader product portfolio

Highly diversified production

network and regional mix

Specialization

High quality industrial products

Significant strategic importance

Located in the Heart of Saskatchewan’s Potash-Rich Basin

Regina

Two additional potash permit areas in the Esterhazy potash region

Southern area of the potash belt of Saskatchewan

(Schematic Diagram)

million t KCl % KCl % K2O

Reserves (Proven and Probable Reserves) Legacy Project area + KLSA 009 160 29 18

Resources (Inferred and Indicated Resources) Legacy Project area + KLSA 009 981 27 17

Reserves and Resources

The reserves figures were determined in accordance with the requirements of the Canadian standard Nl 43-101 of the “Canadian Securities Regulators”.

Two more potash exploration licences close to Esterhazy

Legacy Project

11

K+S Group

On track for commissioning in summer 2016

12

Legacy Project

12

100% Total budget

CAD 4.1bn

25%

50%

75%

Capex

spent

Pre-assembly vessels ECC started (on site)

Test cavern connected -

90 drill holes and cavern

development facilities

completed

Off-load drum dryer at Legacy site

Legacy site (September 2014)

40% of total capex spent and a further 30% of supplier contracts assigned

Increased visibility reducing risk of cost overruns

K+S Group

Competitive production costs

At full utilisation of 2.86 million tonnes KCl/a (Phases 1+2)

No increase in prices and costs after the construction phase

Legacy Project

~ 90 CAD/ tonne

~ 65 CAD/ tonne

~ 30 CAD/ tonne

Total costs (Phase 1+2)

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 CAD

13

K+S Group

Capex development

Phase 2 Phase 1

Capex 2011 to 2022: CAD 4.1 billion 2023 to 2034: ~ CAD 0.7 billion

Phase 3

Activity Primary mining: Development of

first caverns and construction

of production and

infrastructure facilities

Production

capacity after

implementation

Development of secondary mining,

expansion of production and

logistics facilities

as of 2017:

2.00 million tonnes KCl/a

as of 2023:


probably as of 2034:


Further expansion of secondary

mining, construction of necessary

additional production and logistics

facilities

Indicative

development

of CapEx

and ramp-up

curve

Legacy Project

Production capacity

in m t KCl/a

Phase 2 – Development of secondary mining Phase 2 – Secondary mining

Phase 1 –

Primary mining

Outlook for Phase 3

CapEx

14

K+S Group


Content

K+S Group

Current Trading B.


Salt 2.


15

K+S Group

Key drivers of the salt business

Salt

Diversified production network reduces risks

Broad product portfolio reduces sales’ volatility

Rapidly industrializing regions experience high growth rates

Markets are regional due to high portion of logistics costs

Salt products typically represent only a small portion of production costs

Industrial salt consumption

K+S’ competitive advantages

De-icing salt consumption

Essential mineral without economically viable substitutes

Consumer/food grade consumption

De-icing during winter weather

Industrial/chemical use

Consumer/food grade salt consumption

Consumption driven by winter weather

Most economic and most environmentally friendly alternative

Diverse and stable salt end uses drive continuous growth

Salt consumption driven by population growth and increasing standards of living

16

K+S Group

Capacity in million tonnes (crystallised salt and salt in brine; excl. captive use)

Main Salt Suppliers Worldwide

Salt

August 2014 17

Sources: Roskill 2014, K+S

Sa

l-

ins

16 14 14

9

5 5

8

Art

yo

mso

l

18

Ch

ina

Na

tio

na

l S

alt

10

Da

mp

ier

4

Mitsui

8

ES

SA

9

Ca

rgil

l

Co

mp

as

s

Am

eri

can

R

ock S

alt

5

Ak

zo

Sü

d-

salz

4

~ 4

K+S Group

Presence in attractive de-icing markets

Salt

Great Lakes

US East Coast

Eastern Canada

Central Europe

Scandinavia

18

K+S Group

Strengthening the salt business unit

19

Salt

Three strategic areas to further strengthen our market position

Expansion of existing exposures towards Asia, South America

and Eastern Europe

Margin improvement

Stronger international cooperation within the business unit

Use of synergies

Clear customer focus (service, quality etc.)

Business unit wide goals

Growth

Efficiency

Culture

K+S Group


Content

K+S Group

Current Trading B.


Salt 2.


20

K+S Group 21

K+S Group

P&L

€ million Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 YoY

Revenues 1,280 875 818 978 1,189 786 827 +1%

EBIT I 278 163 116 100 220 157 134 +16%

t/o insurance gain - - - - - 30 6

EBIT I w/o insurance gain 278 163 116 100 220 127 128 +10%

Margin 22% 19% 14% 10% 19% 16% 15%

Financial result -18 -18 -21 -20 -27 -48 -24

EBT, adjusted 260 145 94 80 193 109 110 +17%

Tax rate, adjusted 27% 27% 23% -14% 26% 26% 31%

Net income, adjusted 190 106 72 69 142 81 76 +6%

EPS, adjusted 0.99 0.56 0.37 0.35 0.74 0.42 0,40

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.

Positive pricing in both business units and cost discipline across the

entire group

K+S Group 22

Cash flow and balance sheet

€ million Q1/13 H1/13 9M/13 FY/13 Q1/14 H1/14 9M/14

Operating cash flow (pre funding plan assets)

320 554 631 772 380 520 629

- Investing cash flow

(pre sale/ purchase of securities) -108 -274 -458 -707 -176 -363 -646

Adjusted free cash flow 212 280 173 65 204 157 -17

CapEx 111 302 489 743 165 436 731

31.03.13 30.06.13 30.09.13 31.12.13 31.03.14 30.06.14 30.09.14

Net debt (-) -619 -791 -902 -1,037 -832 -1,098 -1,305

t/o Net financial debt (-) 251 17 -96 -191 10 -102 -275

NetDebt/ EBITDA (LTM) 0.6 0.8 0.9 1.1 1.0 1.3 1.5

Equity ratio 53% 53% 53% 45% 46% 46% 52%

Solid cash flow – CapEx increased as planned

K+S Group

K+S Group

Evidence that market prices have bottomed

23


Prices in USD converted into Euro with quarterly average fx-rates.

Market

Brazil: Continued good demand

with prices trending higher

Europe: Low season with

stable prices

South East Asia: competitive

pressure easing

K+S product portfolio

Europe remained in good shape

Overseas benefiting from

improved pricing trends

Strength of specialties continued

200

250

300

350

400

Total Europe Overseas

2013 2014 2012 2011

in € K+S average portfolio prices

Q3/13:

€ 280

Q3/14:

€ 279

K+S Group 24


Business unit performance


Revenues 626 548 457 407 507 461 451 -1%

EBIT I 209 182 107 54 134 159 111 +4%

t/o special item - - - - - 30 4

EBIT I w/o special item 209 182 107 54 134 129 107 -

Margin 33% 33% 23% 13% 26% 28% 24%

t/o Legacy OpEx -6 -6 -6 -6 -7 -7 -10

Average selling price (€/t) 308 309 280 271 262 268 279 -

Sales volumes (million tonnes) 2.03 1.77 1.63 1.51 1.94 1.72 1.62 -

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 LTM

Costs per tonne(1,2) 205 207 215 234 192 193 212 206

Excl. Legacy 202 205 211 230 207 202 206 202

Positive price trends and continued cost discipline

(1) (Revenues – EBIT) / Sales volumes (2) Excl. anticipated insurance payment

K+S Group 25

Salt

Business unit performance


Revenues 615 285 321 531 641 287 335 +4%

EBIT I 73 -14 9 49 89 2 25 >100%

Margin 12% -5% 3% 9% 14% 1% 7%

Sales volumes (million tonnes) 8.9 3.0 3.6 7.3 10.5 3.2 3.9 +8%

De-icing 6.5 0.8 1.4 5.1 8.2 1.0 1.6 +14%

Non de-icing 2.4 2.2 2.2 2.2 2.3 2.2 2.6 +5%

Average selling prices (€)

De-icing 55.1 52.1 51.9 55.2 48.7 47.1 51.8 -

Non de-icing 99.5 106.5 104.4 103.2 100.9 102.4 104.1 -

Early buying mainly in North America and cost reduction efforts – mild

European winter in 2014 will offset part of the progress

K+S Group

K+S Group

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Bond I € 500 million (June 2012)

Bond II € 500 million (Dec 2013)

Bond III € 500 million (Dec 2013)

RCF € 1 billion (undrawn)

Peak years in terms of leverage

Conservative balance sheet structure

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

26

Financial instruments

Group capex

Capex spent of >€1.0 billion

per year from 2014 to 2016

driven by Legacy Project

K+S Group

0%

2%

4%

6%

8%

10%

0%

10%

20%

30%

40%

50%

60%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Target payout ratio

of 40-50%

K+S Group

Dividend policy

27

• Dividend policy

K+S pursues an earnings-based

dividend policy

Return to payout ratio of 40-50%

as soon as possible

• Attractive dividend yield

Average dividend yield of 3%

over the last ten years

A return to 40-50% payout ratio

would bring back dividend yield to

historical average

K+S historical dividends

Payout ratio (lhs) Dividend yield (rhs)

K+S Group

Content

28

K+S Group


Current Trading B.


Salt 2.


K+S Group

Outlook

Guidance 2014

29

1) Incl. ̴ 3 million tonnes of potassium sulphate and potash grades with lower mineral content (2) Incl. insurance gain of € 36 million

FY 2014 Versus prev.

guidance FY 2013


Global sales volumes 62 million tonnes(1) 59 million tonnes(1)

K+S sales volumes At 2013 levels 6.9 million tonnes

Average selling price Moderate decline € 293.8

Salt

K+S sales volumes Moderate increase 22.8 million tonnes

t/o de-icing Good 14 million 13.8 million tonnes

Group

Revenues € 3.7–3.9 billion € 3.95 billion

EBITDA € 820-880 million(2) € 907 million

EBIT I € 580–640 million(2) € 656 million

Capex ~ € 1.1 billion € 0.7 billion

K+S Group

Production network on three continents in Salt

Summary

K+S Group

Legacy on track for commissioning in summer 2016

‘Fit for the Future’ making good progress

Proven diversified and robust portfolio

30

Return to payout ratio of 40-50% as soon as possible

K+S Group 31

Contact details

K+S Investor Relations

E-Mail: [email protected]

Homepage: www.k-plus-s.com

IR-website: www.k-plus-s.com/de/ir


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 32

Forward-looking Statements

K+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 – 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.


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

K+S Aktiengesellschaft · Bertha-von-Suttner-Straße 7 · 34131 Kassel | Germany · Internet: www.k-plus-s.com

Investor Relations · phone: +49 (0)561 / 9301-1100 · fax: +49 (0)561 / 9301-2425 · email: [email protected]

Financial Calendar

12 Mar 2015: FY report 2014 – 12 May 2015: AGM / Q1 report – 13 Aug 2015: Q2 report – 12 Nov 2015: Q3 report

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