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K+S Aktiengesellschaft
UBS European ConferenceLondon, 16 November 2016
Norbert Steiner, CEO
K+S Group 2
ContentK+S Group
K+S’ Unique Strategic PositionA
Current TradingB
OutlookC
Salt2
Potash and Magnesium Products1
K+S Group 3
Investment CaseK+S Group
Complementary Activities
Salt Business Unit
Potash and Magnesium Products Business Unit
K+S Group
Geographicreach
Broad productportfolio
Positionedfor growth
K+S Group 4
Our ProductsK+S Group
in % of sales volumes, FY 2015
Potash and Magnesium Products Salt
Industrial products
Specialties
KCl (MOP)
De-icing
Industrial
Salt for chemical use
Food processing
46%56%
44%16%
10%
14%
8%
6%
Consumer
K+S Group 5
Our ProductsK+S Group
De-icing
Fertilizer
Food processing
Chemicals
Pharma
Oil & Gas
Agriculture(Feed)
~ 10m tons
~ 6m tons
~ 11m tons
K+S Group
From Capex to CashK+S Group
6
Capex Phase Cash Phase 2020
Net debt2
< € 2.0 billion
Leverage2
1.0-1.5x
CapexMaintenance
FCFPositive
EBITDA5
~ € 1.6 billion
Net debt1,2
€ 3.2 billion
Leverage2 (LTM)4.9x
Capex3
€ 1.3 billion
FCFNegative
EBITDA4
€ 500-560 million
Keeping cost discipline above
and beyond “Fit for the
Future”
Successful implementation of “Salt 2020“
Strategy
Enhancing portfolio of
higher yielding products
Managing environmental
challenges particularly in
Germany
Successful commissioning
of Legacy
Management Agenda
Fundamentals of the potash business expected to improve5
1 Q3/16 2 incl. provisions 3 2015 4 Guidance 20165 Main assumptions: Unaffected potash production in Germany and Canada; Potash price level of summer 2015; USD/EUR 1.10; normal winters in North
America and Europe. Development of strategic measures to support the goal.
K+S Group 7
ContentK+S Group
K+S’ Unique Strategic PositionA
Current TradingB
OutlookC
Salt2
Potash and Magnesium Products1
K+S Group 8
Long-Term Dynamics Positive for FertilizerPotash and Magnesium Products
4.300 m2 2.100 m2 1.800 m2
Global population development
Arable Landper capita
Proteinper capita
60 g/ day 80 g/ day 130 g/ day1)
Jahr
3.0 billion
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, only roughly a quarter 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 billion 9.7 billion
1960 2010 2050
Sources: UN, World Population Prospects, 2012 Revision, UNDP, 2013; FAOStat 20141) FAO 2014 - forecasts based on the expected increase in animal protein
K+S Group 9
Utilizing Entire Range of Minerals in Complex DepositsPotash and Magnesium Products
KCl 16.1%
Kieserite 20.4%
Residue 63.5%
e.g. Neuhof 2014
Mineral extraction
Reducing specific costs of our MOP products
Kieserite
Korn-Kali
Magnesia-Kainit
MOP
K+S product offering
SOP
Extending our product offering
$$$
Raw
Sal
t
KCL (MOP)
3.1
Industrial products
0.7
Specialties
3.0
Basis: 2015 Sales volumes in million tons
6.8
SOP
Korn-Kali
Kieserite
Industrial potash
Health Care & Nutrition
FertilizerIndustrial
ApplicationsHealth Care &
Nutrition
K+S Group 10
Leading Position in EuropePotash and Magnesium Products
Europe
South America
Asia
Other regions
K+S Group 11
Q12012
Q12013
Q12014
Q12015
Q12016
Bas
is: Q
12
01
2
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Bas
is: Q
12
01
4
K+S average selling price versus selected peers
MOP gran. Europe vs. Brazil (Source: FMB)
200
300
400
500
600
200
300
400
500
600
Europe (€, Granular, cfr)
Brazil(US$/t, Granular, cfr)
US$/t €/t
2011 2012 2013 2014 2015 2016
K+SK+S
Potash and Magnesium ProductsOur Unique Portfolio Makes Us More Robust
Peers
Peers
K+S Group
Limited deep-well injection permit at the Werra plant
Review by authorities still ongoing
Production largely based on water flow rate of Werra river
Measures to mitigate impact from missing permit ramping up slowly
Expansion of tailings pile capacity Wintershall(Werra) and Zielitz
Prolongation of Werra river injection permit
Implementation of sustainable solutions
Oberweserpipeline
Coverage of tailings piles
Underground backfilling(currently being analyzed)
Environmental RoadmapPotash and Magnesium Products
2016 2019 and beyond
(1) Kainite Crystallization and Flotation Facility
Continuation of implementation of measures to mitigate impact from missing permit
Commissioning of KCF(1)
will reduce saline wastewater from Werra plant by 1.5 million m³ to 5.5 million m³
Expansion of tailings pile capacity Hattorf (Werra)
2017/2018
12
K+S Group 13
Strengthening our Global Presence Legacy Project
ChinaIndiaSouth East Asia
North America
South America
Expanding our current production portfolio in Germany with a North American production site Second source supplier
Securing a good asset base with competitive production costs
Sales and distribution through existing distribution structures of the K+S group
Exclusive outline agreement with Koch Fertilizer about supply and sales of Potash fertilizers in the US
Regional growth projects in China and SEA
Flexible multi-product strategyLocated in the Heart of Saskatchewan’s Potash-Rich Basin
Regina
Two additional potash permit areas in the Esterhazy potash region
K+S Group 14
Legacy ProjectCleanup After Incident in Progress
Crane for removal of damaged equipment on site
Production of 1st ton expected in Q2/17
Capacity of 2 million tons p.a. will be reached by the end of 2017
equals
€ ~3.1
2013 Final
Budget development (in billion)
CAD ~4.1 Budget of CAD 4.1 billion will be
moderately exceeded due to incident
Positive currency development led to unchanged budget in EUR terms since review in 2013
K+S Group 15
ValuationLegacy Project
~90
2017 2018 2019 2020 2021 2022 2023
Co
sts
pe
r to
n (
CA
D)
Volume ramp-up (m metric tons) /costs per ton (CAD)
Production costs Logistics costs Mining taxes/ royalties
<1m up to 2m ~2m ~2.3 ~2.4 ~2.6 ~2.9Sales volumes (metric tons)
Implied Value Per Share (€)
Terminal growth rate
0% 2%
WA
CC
7% ~ 21
8% ~ 11
Volume ramp-up/ costs per ton (CAD)
Main assumptions:
Unaffected potash production Potash price level of summer 2015
(time of release of guidance)
K+S Group 16
Acquisition in ChinaPotash and Magnesium Products
Huludao Magpower Fertilizers Co., one of the largest producers of synthetic magnesium sulphate (SMS)
SMS is used as fertilizer for oil palms, soybeans and sugar cane as well as for industrial applications
Strengthen our competitive position in specialties
Improved access to growth markets of South-East Asia and China
Scalable low cost production assets
Huludao
K+S Group 17
ContentK+S Group
K+S’ Unique Strategic PositionA
Current TradingB
OutlookC
Salt2
Potash and Magnesium Products1
K+S Group
Salt
18
Low single-digit demand growth p.a. to 20181
1 Source: Roskill
Demand driven by … Product category
Long-Term Dynamics in Salt Demand
De-Icing
Food processingPopulation growth
Economic growth andindustrialisation
Winter weather conditions
Infrastructure development
Increasing standard of living
Industrial
ChemicalUrbanization
Consumer
K+S Group
Inevitable for lifeSalt
19
Main Applications:
Food processing industry
Baking industry
Condiment and preservative agent
Main Applications:
Chemical industry
Chlor-Alkali processes (→ PVC)
Polycarbonates ,MDI (Isocyanat)(→ plastics, synthetic resin)
Synthetic Soda Ash (→ glass)
Main Applications:
Winter road maintenance services
Commercial users
Private households
Main Applications:
Water treatment
Drilling fluids
Animal feed
Infusion, dialysissolutions
Pharmaceuticals
Preserving of fish
Dyeing works
Leather treatment
De-Icing Food processing Industrial ChemicalConsumer
Main Applications:
Table salt
Dishwasher care
Water softening
Pool chlorination
Body care
K+S Group 20
Unrivalled Global Production NetworkSalt
Competitive edge: Unrivalled global
production network
More than 30 assets on 3 continents allow close proximity to customers in a business that is highly freight-cost sensitive
Ensuring close proximity to customers Broad range of products due to variety of production methods Best in class supply chain assets and competence Industry best cost production in Chile
Expansion into Asia-Pacific:
Project Launch in Australia
K+S Group 21
Diverse Regional and Product PortfolioSalt
NormalizedRevenue
Distribution
Consumer
Industrial
Food processing
Salt for chemical use
1 De-icing adjusted to normal winter
K+S Group 22
Presence in Attractive De-Icing Markets Salt
Indicative regional strength of winter
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
Europe North America
Great Lakes
US East Coast
Eastern Canada
Central Europe
Scandinavia
K+S Group 23
‘Salt 2020’ Strategy – On TrackSalt
211
62
118
173
266
250+Normalized
2011 2012 2013 2014 2015 2020e
Equalsmore than€ 400 millionEBITDA
Expected EBIT development
Safety first!
Remove silo thinking
Transparency/trust
High performance and engaged workforce
Fit for the Future
Business and technical processes
Supply chain and distribution network improvements
Market share growth
New segments
New regions
Actual results
Salt 2020 Launched
Priority areas
GROWTH CULTUREEFFICIENCY
K+S Group 24
Expansion into Asia-Pacific: Project Launch in AustraliaSalt
“We want this project to give a boost to our planned expansion into the Asian markets. We see big potential there, and want to sustainably participate in the
expected growth there in the future. The purchase of the licenses is the foundation to
achieve this.” Mark Roberts, CEO Salt
Component of “Salt 2020” strategy
Initial focus on obtaining necessary permits
CapEx estimate of around € 225 million
Estimated production capacity of 3.5 million tons p.a.
Main customers in the chemical industry in Asia
Possible production start in 2022
K+S Group 25
ContentK+S Group
K+S’ Unique Strategic PositionA
Current TradingB
OutlookC
Salt2
Potash and Magnesium Products1
K+S Group 26
P&LK+S Group
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.
€ million FY/14 Q1/15 Q2/15 Q3/15 Q4/15 FY/15 Q1/16 Q2/16 Q3/16
Revenues 3,822 1,377 914 891 993 4,175 1,096 732 688
EBIT I 641 317 179 132 154 782 218 15 -31
t/o insurance gain 36 0 0 0 0 0 0 0 0
EBIT I w/o insur.gain
605 317 179 132 154 782 218 15 -31
Margin 16% 23% 20% 15% 16% 19% 20% 2% -5%
Financial result -126 -40 -14 -7 +27 -34 -13 -15 -9
EBT, adjusted 515 276 166 125 181 748 205 0 -41
Tax rate, adjusted 29% 28% 28% 29% 25% 28% 28% 29% 34%
Net income, adjusted
367 198 119 89 136 542 148 0 -27
EPS, adjusted 1.92 1.04 0.62 0.46 0.71 2.83 0.77 0.00 -0.14
K+S Group
2013 2014 2015 2016
>150
30
>180
27
Cost Discipline Will Remain HighK+S Group
on
track
€ million
“Fit for the Future” on track More than 2/3 of total
aspirations achieved Measures implemented will
continue beyond 2016 with full effects until 2018
Further top-down measures beyond “Fit for the Future” initiated Effects coming through in
2017 and 2018
K+S Group 28
Cash Flow and Balance SheetK+S Group
€ million FY/14 Q1/15 H1/15 9M/15 FY/15 Q1/16 H1/16 9M/16
Operating cash flow 707 301 423 613 669 294 359 390
- Investing cash flow(pre sale/ purchase of securities)
-1,013 -203 -516 -877 -1,305 -243 -537 -847
Adjusted free cash flow -306 98 -93 -264 -636 50 -178 -456
CapEx 1,153 200 555 905 1,279 280 643 904
Net debt (-) -1,626 -1,602 -1,968 -2,173 -2,400 -2,367 -2,860 -3,180
t/o Net financial debt (-) -591 -440 -814 -1,007 -1,364 -1,315 -1,756 -2,052
Net debt/ EBITDA (LTM) 1.8 1.6 1.9 2.1 2.3 2.5 3.6 4.9
Equity ratio 51% 52% 52% 51% 52% 52% 49% 48%
K+S Group 29
Debt ProfileK+S Group
Bond I € 500 million(expn. June 2022; coupon: 3.000%)
Bond II € 500 million(expn. Dec 2021; coupon: 4.125%)
Bond III € 500 million(expn. Dec 2018; coupon: 3.125%)
RCF € 1 billion
Debt Instruments
2016 2017 2018 2019 2020 2021 2022
Schuldschein € 700 million(3-yrs: € 295 million; 5-yrs: € 365 million; 7-yrs: € 40 million)
K+S Group 30
Potash and Magnesium ProductsK+S Group
(1) (Revenues – EBIT) / Sales volumes (2) Excluding OpEx Legacy (3) Excl. anticipated insurance payment
€ million FY/14 Q1/15 Q2/15 Q3/15 Q4/15 FY/15 Q1/16 Q2/16 Q3/16
Revenues 1,884 608 501 471 511 2,091 461 371 302
EBIT I 489 183 144 92 127 546 102 15 -49
t/o insurance gain 34 0 0 0 0 0 0 0 0
EBIT I w/o insurance gain 455 183 144 93 127 546 102 15 -49
Margin 24% 30% 29% 20% 25% 26% 22% 4% -16%
t/o Legacy OpEx -37 -13 -20 -15 -20 -68 -19 -21 -26
Avg. selling price (€/t) 274 314 310 310 292 307 272 250 239
Sales volumes (million tons) 6.87 1.94 1.61 1.52 1.75 6.82 1.69 1.48 1.26
FY/14(3) Q1/15 Q2/15 Q3/15 Q4/15 FY/15 Q1/16 Q2/16 Q3/16
Costs per ton (1,2) 208 212 209 239 208 217 201 226 258
K+S Group 31
SaltK+S Group
€ million FY/14 Q1/15 Q2/15 Q3/15 Q4/15 FY/15 Q1/16 Q2/16 Q3/16
Revenues 1,779 727 374 382 442 1,925 595 319 346
EBIT I 173 142 43 43 39 266 123 5 18
Margin 10% 20% 11% 11% 9% 14% 21% 2% 5%
Sales volumes (million tons) 23.6 9.1 3.6 3.8 4.7 21.1 7.1 2.9 3.5
De-icing 14.4 6.9 1.2 1.5 2.3 11.9 4.9 0.6 1.0
Non de-icing 9.2 2.2 2.4 2.3 2.4 9.2 2.2 2.3 2.5
Average selling prices (€)
De-icing 53 65 65 62 67 65 64 53 52
Non de-icing 104 119 120 124 118 120 122 123 113
K+S Group 32
ContentK+S Group
K+S’ Unique Strategic PositionA
Current TradingB
OutlookC
Salt2
Potash and Magnesium Products1
K+S Group
K+S GroupGuidance FY 2016: EBIT I Bridge
33
Actual2015
Volume-/price
Missing deep-well injection
permit
Othereffects(net)
Fit for theFuture
2016e
782
€ million
200
260
2016e EBIT range
Main effects:- OpEx Legacy- Higher D&A
Main assumptions:Potash• Lower YoY potash ASP• Hydrological normal year• Execution of countermeasures• Sales volumes around 6.1 million tons
Salt• Moderate decline of de-icing volumes• Slight increase of non de-icing volumes
may not offset this
K+S Group
K+S GroupDividend policy
34
Target payout ratio of 40-50%
0%
2%
4%
6%
8%
10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2011 2012 2013 2014 2015
Payout ratio (lhs) Dividend yield (rhs)
Earnings-based dividend policy
Payout ratio of 40 – 50% of adjusted net profit
Dividend 2015: € 1.15 per share(2014: € 0.90 per share)
1) Based on year-end share prices
1)
K+S Group 35
IR Contact DetailsK+S Group
E-Mail: investor-relations@k-plus-s.comHomepage: www.k-plus-s.comIR-website: www.k-plus-s.com/en/ir
K+S AktiengesellschaftBertha-von-Suttner-Str. 734131 Kassel (Germany)
Laura SchumberaJunior Investor Relations Manager
Phone.: +49 561 / 9301-1607Fax: +49 561 / 9301-2425laura.schumbera@k-plus-s.com
Thorsten BoeckersHead of Investor Relations
Phone: +49 561 / 9301-1460Fax: +49 561 / 9301-2425thorsten.boeckers@k-plus-s.com
Andrea RachInvestor Relations Assistant
Phone: +49 561 / 9301-1100Fax: +49 561 / 9301-2425andrea.rach@k-plus-s.com
Martin HeistermannSenior Investor Relations Manager
Phone.: +49 561 / 9301-1403Fax: +49 561 / 9301-2425martin.heistermann@k-plus-s.com
Patrick KoflerSenior Investor Relations Manager
Phone.: +49 561 / 9301-1885Fax: +49 561 / 9301-2425patrick.kofler@k-plus-s.com
K+S Group 36
Forward-Looking StatementsK+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 of the Annual Report – materialize, 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 Group
K+S Group 38
K+S Group
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: investor-relations@k-plus-s.com
Financial Calendar 2017: 16 Mar: FY/16 – 9 May: Q1/17 – 10 May: AGM – 11 May: ExDiv – 15 Aug: Q2/17 – 15 Nov: Q3/17
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
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