Thorsten Boeckers, Head of Investor Relations Britta ...
Transcript of 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%)
Potash and Magnesium Products
KCl (MOP) (47%)
Industrial product (11%)
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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
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
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Examples:
• Redesign of packaging material of
various products (Salt)
• Moving storage facilities from Antwerp
to Hamburg harbour (Potash)
K+S Group
K+S’ Unique Strategic Position A.
Content
K+S Group
Current Trading B.
Outlook and Summary C.
Salt 2.
Potash and Magnesium Products 1.
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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
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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)
Potash and Magnesium Products
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'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
Potash and Magnesium Products
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
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K+S Group
On track for commissioning in summer 2016
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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
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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:
2.86 million tonnes KCl/a
probably as of 2034:
4.00 million tonnes KCl/a
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
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K+S Group
K+S’ Unique Strategic Position A.
Content
K+S Group
Current Trading B.
Outlook and Summary C.
Salt 2.
Potash and Magnesium Products 1.
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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
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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
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K+S Group
Strengthening the salt business unit
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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
K+S’ Unique Strategic Position A.
Content
K+S Group
Current Trading B.
Outlook and Summary C.
Salt 2.
Potash and Magnesium Products 1.
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
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Potash and Magnesium Products
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
Potash and Magnesium Products
Business unit performance
€ million Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 YoY
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
€ million Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 YoY
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
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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
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• 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
K+S’ Unique Strategic Position A.
Current Trading B.
Outlook and Summary C.
Salt 2.
Potash and Magnesium Products 1.
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
Potash and Magnesium Products
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
K+S Aktiengesellschaft
Bertha-von-Suttner-Str. 7
34131 Kassel (Germany)
Martin Heistermann
Investor Relations Manager
Phone.: +49 561 / 9301-1403
Fax: +49 561 / 9301-2425
Thorsten Boeckers
Head of Investor Relations
Phone: +49 561 / 9301-1460
Fax: +49 561 / 9301-2425
Andrea Rach
Investor Relations Assistant
Phone: +49 561 / 9301-1100
Fax: +49 561 / 9301-2425
Matthias Jelden
Investor Relations Manager
Phone.: +49 561 / 9301-2204
Fax: +49 561 / 9301-2425
Patrick Kofler
Senior Investor Relations Manager
Phone.: +49 561 / 9301-1885
Fax: +49 561 / 9301-2425
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.
33
K+S Aktiengesellschaft
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