K+S Aktiengesellschaft

Hello and welcome to the K plus S conference call regarding the publication of the quarterly report Q120 hosted by Thurston Booker's CFO. For the duration of the call, you will be a listen only. However, at the end of the call, you will have the opportunity to ask questions. If at any time you need assistance, please press star zero on your telephone keypad and you'll be connected to an operator. Please note on page two of the presentation you will find a disclaimer. I am now handing over the call to Thorsten Bokers to begin. Please go ahead.

Thank you, Judy. Good morning, everybody, and welcome to our Q1 conference call. Before we go through the presentation, I would like to mention two things. First of all, Burkhard Lohr asked me to take over this call. He has tested positive for corona, In his case, the cause of the disease is a mild one. However, he stays in quarantine this week. Secondly, some background on our announcement from last Friday. So far, we have come through corona operationally well. In Q1, we had some smaller burdens, for example, because of efficiency losses due to health measures to ensure the safety of our employees, or the delayed new contract with Chinese customers has an impact on the timing of recovery in potash prices. Also, we cannot rule out that access to liquidity remains difficult because of further uncertainty in the markets about the future economic development. As a precautionary measure, we have decided to adjust the dividend proposal to the minimum to maintain eligibility for a state-secured KFW loan. Let me start our presentation on page The corona crisis is keeping all of us on edge. In some industries, sales have dropped overnight. It is different for us because we offer essential products. It is also part of our social responsibility to serve the needs of our customers in the fields of medicine, pharmaceuticals, food production, animal feed, and agriculture in the best possible way and to ensure safe waste disposal. Particularly in these times, we are proving that we are a reliable supplier. Slide four, please. Every day, our employees are making great contributions with their personal commitment and flexibility by keeping our production and the whole supply chain up and running. We optimized the shifts at the production plants to ensure social distancing e.g. on the way into or out of the mine or in the changing rooms. We have expanded home office regulations for administrative staff. Social distancing also applies in our offices. On slide five, please. Corona will trigger an economic downturn. Based on our product portfolio, we analyzed that 77%, so a clear majority of our total sales, is not only slightly dependent on the general GDP development. This should provide us a certain resilience against what's coming up. On slide six, I would like to give you a brief update on our package of measures to reduce debt. And the biggest measure is certainly the sale of the OU Americas. In March, we informed you about that, that we now plan to fully divest the America's operating unit. Despite the current corona crisis, the same process is going according to plan, and signing in 2020 remains our goal. We still see a lot of interest from potential buyers, including everything from family-run offices to private equity and strategic investors. What is also a major part of our package of measures is what you see on slide 7, because with the complete sale of the operating unit Americas, the restructuring of the rest, and especially of SG&A functions, has to be done. With only one remaining operating unit, all of the administrative functions have to be adapted to the new K plus S structure. We are doing this to reduce our costs, and complexity, and to focus on our core business. We will also ensure that all production sites are able to generate positive free cash flow, even in difficult market conditions. Future-oriented solutions in the environmental sector that sustainably reduce our capex have also to contribute to this target. We will keep you posted throughout this process. I am convinced that the realignment of KplusS will result in a leaner and more efficient company. Moving on to slide eight. Our EBITDA reached 201 million euros compared to 270 million euros in the previous year. The main reasons were a very mild winter, which led to significantly lower sales in the community's business and lower average selling prices in agriculture. Good cost discipline and higher earnings contributions from industry and consumer segments were able to partially offset this. However, the coronavirus, as mentioned earlier, affected us too. Compared to other industries, we are in the favorable situation that our products are considered essential, and therefore, we only had small losses, or we had no losses on the sales side, but the measures to protect the employees and to ensure production and shorter shutdowns at some smaller sites cost us around 10 million euros in this first quarter. On slide nine, the customer segment agriculture. The Chinese import stock for potash was still in place in the first quarter. As a result, Prices in our overseas markets like Brazil continued to fall due to temporary product overhang and missing price orientation. In Europe, prices were almost stable. The good weather conditions in Europe helped us to return to normal sales levels after the production cuts in the second half of last year. At the end of April, we finally saw the signing of the Chinese supply contract at US$220 per tonne. We therefore assume that MOP downward trend has bottomed, and we have already seen a first positive reaction in the Brazilian market. On slide 10, just briefly, because I mentioned it already, the mild winter has led to a significant drop in sales and earnings in all regions. In total, the icing volumes in the first quarter were almost 50% below the high level of the previous year. On slide 10, in the industry segment, we offer products for a variety of applications. Some sectors, such as chemical source or the supply of hotels and restaurants, are affected by corona. Other segments, such as the pharmaceutical business or the production of cellulose, have so far more than compensated for the negative effects on our earnings. A significant improvement in operational performance also contributed to this, but we suffered a little with lower prices of our potash-based industry product range. What we lost to food sold in the B2B area was more than compensated by the demand in the consumer segment. The more people cooked at home, the more table salt was bought in the supermarkets. In these uncertain times, customers by well-known branded products that they trust, like Morton Salt and its Umbrella Girl. And then finally, the outlook on slide 12. We had a good start into 2020. However, mainly due to the late China contract and ripple effects on other markets, we see our EBITDA at about $520 million now for 2020. We also see further optimization potential in working capital and will stay CapEx disciplined, so we still expect the free cash flow to be around the break-even point. Because we have already received several questions regarding the impact of the dry weather on our wastewater disposal, due to the additional local storage capacities installed last year, we can state that even if we have a dry summer like in 2018, we will not see foresee any standstill. This concludes my presentation, and Judy, we can now go into the Q&A session, please.

Thanks. If you would like to ask a question, please press star 1 on your telephone keypad. If you change your mind and would like to withdraw your question, please press star 2. If you would like to ask more than one question, please submit one question at a time. Once answered, you will move on to your next question. You will be advised when to ask your question. And the first question is coming from the line of Christian Fietz from Kepler. Christian, you're now unmuted. Please go ahead.

Yes, thank you. So Christian Fietz here from Kepler. Good morning, everybody. Good morning, Torsten. First question, and then I'll have the second one. How much is your industry segment actually impacted by the slowdown in chemical production? Because at least some of your salt clearly goes into the chlorine chain as well. Can you comment on that?

Yes, Christian, that's what I mentioned briefly in this speech. We saw that the chemicals business was affected already by the downturn in the chemicals industry. However, in the first quarter, we haven't seen the full impact yet. So it was only, when I look at the revenue development, only marginally down, but we certainly expect a higher impact here in the coming quarters.

Okay. Fair enough. Thank you. Then my second question is, can you comment on your aspiration to go for a KFW-backed credit facility? and how would that improve your financial flexibility when it comes to refinancing your debt in 2021? Thank you.

Yeah, I think, first of all, it is important to maintain liquidity for 2020 and what else is coming. As we said, it's a precautionary measure. The first quarter was good, and we have some hope that we come through the year without bigger distortions of the operating business. But can we rule this out? No, we cannot. Because when you look at markets like Brazil, we may not have seen the negative effects from the corona crisis yet. And here, given that we had already first... distortions by Corona and, um, that's the, uh, what I just described is maybe coming in the next quarters. Um, it is for us important to have access to liquidity sources. And I mean, we are non-investment rate rated, right? So some of the, uh, some of the liquidity sources, uh, are closed for us. And, um, here KFW, uh, offers us help. And, um, So it's a precautionary measure, and I'm less looking at refinancing next year. I mean, the maturities next year are in May and in December, so we've got some time. But this is more to keep the liquidity and to keep the business running in case we will come into issues for the remainder of this year.

Okay, great. And then, just finally, all the best to Boca de Lora. I will pass it on. And to recovery. Thank you.

Thank you, Christian, for those questions. And the next question is coming from the line of Markus Meyer from Pardahevla. Markus, you're now unmuted, and may now ask your question.

Yeah, good morning, gentlemen. Three questions for Meyer as well, maybe the first one on the ag business. If I look on the Q1 MOP, volumes and also the revenue, the implied price would be around 202 euros per ton or if you take 110 US dollar euro exchange rate 222. This is substantially below the current market price no matter in what kind of market. Could you explain this please?

I'm not sure if I fully got your question, Marcus. Can you repeat this?

If you take the revenues of column chloride divided by the volumes of column chloride, so this 246 million revenues divided by 1.22 million ton, then you come up with the average price of 202 euros per ton MOP or column chloride.

Just MOP? Yes. Yeah, so when I look at our average selling price for the total portfolio, we stand for the first quarter at 239. And you know that our specialties, and we haven't seen virtually no negative effect on specialties and not on the European business in the first quarter, kept this price higher than, of course, the MOP price, where we have especially seen the decline in the Brazilian markets. So I think when I follow your calculation for MOP overseas, it is certainly, I mean, we're showing this as well in the table. We are there at 225. So, and this is in line with what the trade journals are also reporting. But we are, yes, we saw a strong decline in prices. This was driven by MOP only and in overseas only. So that's what I can confirm.

But have you basically undercut then prices which are officially in the market or what is the explanation for this very low MOP price?

No, I mean, one reason is certainly that we saw a strong business in March. Also with the startup of the Brazilian season and March, so at the end of the quarter, we The sales price was lower than at the beginning of the quarter, but we haven't really undercut any prices. So we are in line with what competition is offering.

Okay. Thank you. And then my second question is on the consumer segment. This significant volume drop, can you explain this a little bit more? I thought out of my... maybe blue-eyed thinking that consumers are more at home and maybe would use more of your products, then why does sharp volume drop in the consumer segment?

Yeah, it's mixed. So when I look at the culinary business, so really the table salt or also water and pool, you're absolutely right. People are at home. And The Germans bought toilet paper and the Americans bought salt. What was driving down the volumes was the BDI business. So we are also selling de-icing salt for consumers, which is reflected here and not in the community's business, obviously. And this led to a drop. So there, the revenues back. Yeah, they are at 10% of what we have achieved last year. So the volume drop you see comes from the de-icing.

Okay, understood. Makes sense. And then last question. You said there was a first initial positive action in the Brazilian market. Have you meant this price-wise or volume-wise?

No, volume is anyway not an issue price-wise.

Okay. Okay. Thank you. You're welcome.

Thank you, Marcus, for that question. And the next question is coming from the line of Alexander Jones from Bank of America. Alexander, you're now unmuted and may now go ahead.

Thank you very much. Two questions, if I may. The first is on your guidance for sales prices in agriculture this year. Could you just give a bit of color around that? the potash price recovery trajectory you're assuming in that, what potash price you're assuming in Brazil, for instance, by the end of the year. That would be helpful. Thank you.

Yeah, Alex. We do see from here for the rest of the year a slight recovery of the market prices. And I mentioned earlier when Marcus asked about this, we saw already a first positive reaction in Brazil that prices are no longer on the downward trend there. And with continued good demand and with continued good Under normal circumstances, so not referring to any possible corona effects, we would expect a slight recovery of the prices in the second half of the year.

Okay, thanks. And then the second question is going back to the industrial volumes. Do you have a sense in April, for example, or in Q2 as a whole, the volume trajectory in terms of whether that's now gone into a decline or, yeah, any run rate that would be helpful?

Not yet, because the thing in industrials is we are serving here more than 10,000, almost 14,000 different industries with potash-containing products and with non-potash-containing products. And it is a broad range from chemical, where I said earlier to Christian, we have seen here certainly a negative impact on the volumes. On the other hand, We have food and animal nutrition and pharmaceutical, which is offsetting a volume decline here. So I would say we see a mixed picture. In general, we have not seen a significant drop yet.

Okay. Thank you.

You're welcome.

Thank you, Alexander. And the next question is coming from the line of David Simmons from J.P. Morgan. David, you're now unmuted, and we now go ahead.

Thanks for taking the question. First one, on volumes, I think it was a surprisingly strong first quarter, given that nutrient and mosaics or volumes flattened down. Can you talk maybe about the new markets that you were able to enter with the higher Bethune quality, and was this the main driver of your higher volumes?

David, first of all, we are happy that we have seen this volume development, of course, and Bethune is contributing here. So the quality, both when you look at the granulated product, but also at the standard product, has improved significantly. And when we talk about new markets, I mean, it is clear that we wanted to tap the U.S. market always, and this is what we still plan. The volume development, this is something one should not forget when you compare our volume increase with that one of the competitors. It's last year in the first quarter, after the closure of our Sigmundshall mine in Germany and some issues on our production plants, we are stronger recovering because last year's Q1 was affected by extraordinary negative effects in availability of product here. So this is certainly why our growth rate is larger. And what this sales volume show is certainly that there's a strong demand for the products. And that's what we are happy for. And for the first time, we can deliver.

That's fair. Thank you. And then secondly, are you still willing to access your revolver or is there a concern that you hit the leverage covenant whilst it's drawn and that that causes cross default? So in other words, is the 800 million revolver, firstly, is it still undrawn today? And secondly, are you willing to access that or are you looking elsewhere for sources of liquidity?

It's fully undrawn. And I mean, it's, we have this RCF in order to use it if necessary. And I think this answers the question.

Thank you.

Thank you, David. And the next question is coming from the line of Ned Henkel from Perito Securities. Ned, you're now unmuted. I'm going to ask your question. Ned Henkel, you're unmuted. I mean, I'll go ahead. Okay, it doesn't look like Ned is unmuted. Ned, if you could hear us, please unmute your line so you could ask your question.

Okay, can you hear me? Yeah. Can you hear me? Okay, thanks. Sorry, I actually was really muted. So my first question would be on cost per ton in agriculture. It seems that it's significantly lower compared to last year. Is that because of the mixed effect, because of more volumes from the tune? That would be my first question.

It's indeed... The reason is that... the first quarter saw a very good production level in Bethune and also in Germany. That's what I, it's part of my answer from the question before because we saw a production without any major distortion here in Germany and we also, and this one part here is certainly the better, the much better product quality in Bethune contributed also there to a higher production and This is why we have seen a drop of the cost per ton on this revenue over EBITDA basis from 205 to 188. Okay. So it's the production level.

Okay. Second question, do you still disclose how much Betune contributes to the overall production level? And if yes, how much was it?

So we're not breaking this down by quarter. But we said, I mean, we saw in last year a production there which was burdened by the production cuts. So Bethune only produced 1.6 million tons. And we will

this year uh certainly come closer to the two million level but i don't want to break this down by quarter okay great um then third question um you said uh in a statement from friday that you now expect a slight earning earnings drop in um the operating unit americas for 2020 um does that affect your price expectations for the intended disposal of the unit?

It's a good question, but we don't expect that this will majorly distort this process. We see, as I said in my speech as well, we still see a very good interest from a broad variety of investors, potential investors. And, I mean, you know it better than I do, probably. The investors look at earnings quality, at earnings stability, and here the business has shown, even in this crisis, that it still can generate, despite the drop in the icing salt volumes, which are obviously only weather-related, and this can change again, We have seen a very stable contribution. You see the revenue drop. You see that the EBITDA only decreased marginally. So there's a high cost discipline in the OU Americas, like in the rest of the group, but there's also an ability to offset lower de-icing salts by, I mentioned it, consumer, by pharmaceutical products. So we don't expect that this will have a negative impact on how investors look at this business.

Okay. And my fourth and last question would be on the dividend. You said, my question would be, could you remind me why there is a minimum dividend? So is that stated in your bylaws or what's the reason for minimum dividend you have to pay?

No, this is something which is stated in the German Aktiengesetz, that there are very strict requirements for not paying a dividend at all. And there's a minimum dividend mentioned of 4%. And this is what we mean with minimum dividends. So we apply for this for precautionary reasons. reasons, and we are not economically in that deep trouble that we could delete the dividend totally.

Okay, thanks. Thank you for that, and the next question is coming from the line of Patrick Raffi from UBS. Patrick, you're now unmuted, and then I'll go ahead.

Thanks, and good morning, Torsten and KPSS team. Three questions, please. The first one, a follow-up on financing. If I go back to the release on Friday, you talked about exploring all options, including the KFW state loan. So if you wouldn't be able to secure that loan, What kind of alternatives were you thinking about, and by what time would you want to have additional liquidity resources secured before you would have to resort to maybe a capital increase, for example? That's the first question.

Yeah, Patrick, really, this is a precautionary measure. We are talking to KfW like we are also talking to our banks. So it is not that we are in urgent need right now. I called it a precautionary measure because we don't know what's coming up over the next quarters. And, for example, when and how will the commercial paper markets open up again? at what point in time would you also be able to place a bond or something similar? So it's really, we want to have this liquidity just in case we need it. And we also said earlier that we have a fully undrawn RCF, which we would also use if necessary. So this shows you that there's no immediate need So I would quote the liquidity situation for now as sufficient. Again, not knowing what comes. And this is how you should read the KfW loan. It's an additional source for liquidity for us, which is now offered.

Okay, thanks. Then a question on CapEx. You were talking about CapEx discipline earlier today. But the guidance, at least qualitatively, remains the same, right, in terms of wording significant increase. Is that significant increase a smaller significant increase than we had before? Or how should we think about that also into next year maybe? How much? I mean, I remember all the comments you made in previous calls around the minimum required capex. But is that something that's moving down? currently or are we still talking about the same orders of binary twos?

You heard me saying that we can run the company at capex levels of about 450 to 500 million. In this year and also partly in next year we have some environmental projects running that we need to execute. Look at the tailings piles expansions at the VERA and also in ZLIS. And there are some more we have to invest in. So we cannot come down, despite all discipline, to this level in this year and in next year. On the other hand, I think the consensus is at around 550, right? And from today's point of view, my best guess is that this is a number I would put into the model if I would be you.

OK, that's very helpful. Thanks. And the last question is also on guidance on EBTA, the 520. That's a surprisingly precise guidance, given that you are still very early in the year. What drove that decision to go for such a precise guidance rather than a range as you had in the past?

I can tell you it was a long discussion. What should we do with the guidance? And having said that, we do not know how the next couple of quarters will develop. Because of the further corona impacts which are possible, we also considered not to give a guidance at all. But we said, if we do see, and especially now after the contract conclusion in China, we have a certain expectation that pricing will bottom and that we do also see a slight increase of the price levels compared to the first quarter. That's what I said earlier. And we said, if this is the case, we can be reasonably safe with the consensus number of 520, and we have baked this into our guidance. I mean, we could have given you a range. On the other hand, you would have looked at the midpoint only, so we would also be at 520. And this was, in the end, where we said, okay, let's give a concrete guidance at this point in time. explicitly said this is without any major corona impacts, right, then we need to talk about this again if this happens.

Thank you very much, Thorsten.

You're welcome. Bye, Patrick.

Thank you so much, Patrick, for that. And the next question is coming from the line of Thomas Sowowa from Societe Generale. Thomas, you're now unmuted. I'm going to ask your question.

Hi there. Good morning. I have two questions, please. Firstly, on the inventory situation at the end of the application season, obviously there is some talk in many markets that there might have been some bug buying amid this threat of COVID-19. Do you have any insight on how the inventories at the end of the season are going to be our farmers applying all day by or will there be an overhang?

We saw a strong demand Thomas and this and this is also confirmed by our sales people gives us confidence that the that there is no significant overhang despite the Corona situation. Now with the China contract, we do see a better utilization of the large suppliers as well, and this should also help to ease this situation.

My second question is on the planned disposal of salt Americas. In your prepared remarks, you say no impact from the COVID-19 situation. I'm wondering, because most of the other companies have been saying that due diligence, for example, right now is barely possible and a lot of transactions are in a standby mode. So could you just explain to us, if possible, at what stage your process actually is, and when do you expect to go into due diligence? Thank you.

I'm not going to give you a more precise timeline, but what I can tell you is, and I really can confirm this, we are talking about a business with leading brands and with a high emotional customer loyalty, and This obviously means that there's still a lot of interest. We haven't seen any drop of parties or parties dropping out. So we feel very happy. And I repeated it already that we expect the signing in 2020. But, Thomas, please understand that I'm not going to give any more precise details of where we are in the process.

Yep, thanks.

Thank you, Thomas, for that question. And the next question is coming from the line of Marcus Schmidt from Odo. Marcus, you're now unmuted. I'm going to ask you a question.

Yeah, thanks for taking the questions. So one is on the KFW loan. Do you understand it correctly that you have not applied yet for the loan, or did you apply already? And if so, at what envisaged terms, such as amount, length, and instrument will be a super senior because I understand that these loans are granted on a super senior basis and also in what time frame do you think you will be able to collect the funds?

We said that we want to keep the chance and all options open and I want to leave it there and I'm not going to give today any volume or any further conditions out because let us first do our job there and then we will certainly provide you with more details on how successful we were.

Okay. And on your answer, have you started talks with banks to waive or reset covenants or will this not be necessary with the new EBITDA guidance?

No. I mean, as I said earlier, we have... sufficient liquidity with the instruments we have in place at this point in time. And I can only repeat what we also said earlier, that we will make sure to meet our contractual agreements. And there are covenants in some debt instruments, which are obviously along with our company objectives. And so we make our best to meet our contractual agreements with the banks.

Okay. Good. Thank you very much.

Thank you, Marcus. And the next question is coming from the line of Stephanie Dinsig from JP Morgan. Stephanie, you're unmuted, and Manal, go ahead.

Hi. Just a couple questions for me, not to belabor the point about covenants, but it would be very helpful to know if the covenants only come into place upon drawing or not. And if so, if you would talk about potentially the amount. I mean, it just really, I know you say that you have access to this liquidity, but it just helps to know, you know, what absolute number. And then also... Can we answer the questions one by one? Sure. Sure.

Yeah. So, I mean, when you look in our balance sheet, you see the cash in hand. And... We have, when I say we have in some of our instruments, the covenants, I think this is also, you can also find this out when you look into the prospectus of the bonds that there are no covenants included. So this leaves us mainly with our RCF. And the RCF has a volume of 800 million and is, as I said earlier, fully undrawn.

Okay, but sometimes the leverage covenants only come into place when you draw over a certain amount. Are you willing to speak to that?

No, the covenants are in place irrespective if the credit line is drawn or not.

Okay, that's useful. And then just on my next question about your comments about this is precautionary for liquidity, and apologies if this has been asked in prior calls, but can you speak to your view in particularly sort of volatile working capital swings in our quarter, What sort of top end of the range cash burn could you expect from working capital in a given month?

Sorry, I was quiet because I needed to think about this briefly. We normally have a high cash inflow from working capital in the first half of the year, which normally leads to or comes from the sales of de-icing sold, where you get the money relatively quickly. When I look at the first quarter working capital, we have on the one hand our working capital measures, which contributed significantly positively. But we also were missing the de-icing sales, which had a negative impact, obviously, on working capital. On the other hand, but this is not coming through in the first and probably not in the second quarter, are the sales from the agriculture business. Here you have sometimes very long, with big customers in overseas markets, very long payment targets. And So I would say that we haven't seen the full potential from working capital in the first quarter yet.

Okay. Thank you very much, and I'll get back in queue.

Thank you.

Thank you, Stephanie. And the next question is coming from the line of Lisa Deneuve from Morgan Stanley. Lisa, you're now unmuted. I'm going to ask you a question.

Good morning, everyone. Two questions from my side. I'll start with the first one. Could you please help us understand how you're getting to free cash flow breakeven guidance for the full year 2020? I'd just like to understand with an EBITDA guidance of 520, CapEx of 550, net interest expense is about north of 100. I mean, what are the drivers to get to free cash flow breakeven or how big does your working capital inflow need to be for that? sort of a little bit of granularity on that would be very helpful. Thank you.

Yeah, Lisa, again, we do our utmost to keep the capex under control, even despite the environmental investments we have to make. Secondly, you're absolutely right. A lot of this comes from working capital, and I just We had pretty good sales in the first quarter, and we will see this money coming in in Q2 and Q3. So this was not yet reflected in the first quarter. And the rest is indeed coming from working capital. There was one measure already in the – this is not working capital, but we sold our administrative buildings in Kassel. So we also had a positive – 40 million coming from this in the first quarter. This was already mentioned in the annual report as well. And we are working on the working capital, and we believe that we can achieve here positive inflows. It's a broad range of projects contributing slightly, but also some bigger measures. we could see another, on a full year basis, a low triple digit million positive effects from working capital measures.

Thank you very much. That's very helpful. The second question, I would love to follow up on the cash cost per ton. I mean, congratulations on getting your cash cost per ton down so much year on year. I would just like to understand a little bit dynamics there, specifically on Germany. I know you don't provide any specific numbers, but are you seeing any sort of tailwinds in your cost base, for example, from energy that are very helpful to the German cash cost? I mean, sort of any sort of movements that bring that cash cost down and sort of better understanding around that would also be very helpful. Thank you.

I would say it's really the high production level. And Q1 was pretty high. It is seasonally in the agriculture business, one of the very strong quarters. So I wouldn't apply the number you have seen now for the rest of the quarters. So we still remain conservative there and do not change our full year guidance yet. We haven't seen any extraordinary positive effect from energy because most of our energy consumption is gas and this is bought already. What you saw in this number is that now Bethune, with the fact that we overcame the quality issues, has contributed significantly to this. So we saw, in order to sum this up, we saw in both regions, in Bethune and also the German plants, an improvement in costs. And this is, from my point of view, especially volume-related. And you saw, of course, a higher contribution, so a higher positive contribution to the cost per ton from the bassoon mine.

Thank you. It's very helpful. If I may just sneak in a last one. On your cost program that is normally to be completed by the end of this year, could you just provide us with an update on where you are in achieving these targets? Thank you.

Which program? Sorry.

Your cost program as cost savings of $115 million by the end of 2020. Okay.

Yeah, the project has started, and I think we said at the press conference in March already that we expect somewhere around autumn here the first results we can announce. But when I look at what we see so far, we are making progress, and we are very happy with this outcome.

Okay, thank you very much, Storsen, and I hope that Bookert gets better very soon. Thank you.

Thank you. I will pass it on.

Thank you, Lisa. And the next question is coming from the line of Oliver Spurge from Warburg. Oliver, you're now unmuted. Let me now ask your first question.

Good morning, Torsten. Thank you for taking my questions. As usual, one by one, I'd like to come back to what you just discussed, the unit costs. When looking to your guidance, when given the year-on-year lower unit costs in the agricultural segment, which seems to be mainly driven by volume. Given your volume guidance here, I wouldn't expect that to fluctuate in the rest of the year too much from where we are today. given that Q2 and Q3 are weaker quarters, I would say they would go up in the next six months. But by Q4, they should come down again quite significantly. And as you are planning for average selling prices a bit higher than the first quarter of 2020, that would give you quite a bit of tailwind in regards to the EBITDA progression in the agricultural segment. And I would just like to connect that to the 520 million you're currently guiding upon. I guess my first question is how much corona effects basically are baked into the guidance. You mentioned 10 million euros for the first quarter. So is that the run rates you are working upon for the next quarters, or am I missing something here? No, Oliver, we haven't.

And 10 million means for the group, right? So we saw also effects in the Americas. We haven't baked into this guidance any significant expectation of corona effects because you don't know really what is coming. We know that we are a little bit less efficient, but this is then more baked into the volume expectations we have. You're absolutely right, and I hear what you're saying, but I want to stay at this point in time on the conservative side with the cost-per-ton guidance. We should also not forget that I talked briefly about the potentially dry summer again, which would then mean we have remote disposal to do from the VERA side, which would increase the costs because of transportation costs. It is simply too early to take or to change this number at this point in time.

Fair enough. The second question is, I think, more concrete. It's about how you handle the drop in volumes in the icing salt in European businesses? Because, I mean, a cut of around about 50% in demand, that's a huge number when it comes to volumes. How do you handle that in your mind? Are they on short-term labor for the time being, or Because it can't just go on producing flat out with demand collapsing by 50%, I guess. So something's got to give. How do you manage that in your mines, in your salt mines in Europe?

Yeah, there's no short-time work. But what the salt mines in Germany have done already in the last years, I mean, it's not the first mild winter we saw in Europe. We have a lot of flexibility when it comes to the workforce. We have agreements in place with them that at times where there's a high utilization, we can call them in. And at times where there's a low utilization, they can stay at home and it balances over the year. And this is what we are making use of right now. So there's no short-time work at this point in time necessary. It is all captured by the regular agreements we have made with the works councils and with them.

Yeah, but wouldn't it be, let's say, favorable from your point of view to do just that? Because with all the corona thing going on, short-term labor isn't something that really stands out at the moment, I guess, and it would be really beneficial to your P&L.

Believe me, believe me, the people, our people running the mines and also our HR guys are doing everything that is favorable for our but also for the company, and this may be a measure or not, but at this point in time, it is not.

Okay. Thank you so much.

You're welcome.

Thank you, Oliver. And the next question is coming from the line of Michael Schiffer from Commerce Bank. Michael, you're unmuted, and then I'll go ahead.

Yeah, thanks for taking my two questions. Most of them have been answered already, but one by one. First of all, good morning, Torsten and the team. First one is on the most recent news flow we have got in the German press at least. There were some talks and reports on discussions you have with the environmental ministry here in the state of Hesse on saline content post basically the expiration of the deep-well injection permit 2022. So I wonder whether you can provide us some update there, whether there's any major risk from today's point of view that you may significantly reduce basically wastewater injection into the Vero River from 2022 onwards. Basically, this would be my first question.

Yeah, this popped up in the news right now, or in the last week, I think. But it is not really something new. It is for a while that we are saying that with the measures we are taking and we do what we can, we cannot achieve the very low limits from 2022 on. But this is something Burkhardt and the team has also discussed with the politicians already. So our goal is, and this is the basis we are discussing, we will meet the target values for 2028 and will no longer discharge process water into the Vera then. But we need to bridge the time until then. And with all the measures we are currently undertaking, I'm also sure that we will find an agreement with the politicians and with other interested parties. I mean, look at this was a press release out a week or two ago. We were very successful in what we have agreed with the BUND in order to reduce the deep well injection volume significantly. So we are doing our utmost and very important is We are in a good contact with politicians, and we are in good contact with communities and with NGOs, and we will overcome any issues there.

Okay. The second question is on today's press in the German Frankfurt Allgemeine Zeitung. There was an article on some disagreement when it comes to taxes, and maybe you can elaborate on this one, whether there's any material risk coming from this end.

This is from a very early tax audit, and I think we elaborated on this already in the annual report, and this was now picked up by the Frankfurter. We have an office on Malta, but we have a very good substance there, which means we are not giving out licenses. We have financing activities there. We have a bunch of people there working in the offices. We have regular meetings in there. In the discussions we have with tax authorities, we have made this point, and we have appealed against this decision for a while. There's currently not a lot happening, and this procedure is very at the beginning, so that an outcome is, of course, hard to predict. But we are also with the advisors we have there are pretty sure that it goes into our favor.

Okay. And then last but not least is a housekeeping one. In the first quarter P&L, there's another financial result, a major negative one of minus 26 million. So I wonder which is a significantly negative number if you compare this with basically previous years. So you can set some light on this one and how this is baked into what's behind this first. And second one, how this is baked into your full year net financial result outlook. I think it's 1 minus 140 minus 150. So is any reversal expected in the quarters to come such as housekeeping?

Yeah, I mean, the number looks strange because it's always the mark-to-market valuation, for example, of lease contracts or in-house cash we have in US dollar and the Canadian dollar, and especially the Canadian dollar moved a lot. So it depends a little bit on the development of the Canadian dollar, also of the US dollar over the next couple of quarters. We have increased the expectation for a negative financial result already now to 140, 150. It was lower before. So we have baked some of this into this. But it's hard to predict the currency developments and then hard to predict the exact outcome of the other financial results. But with 140, 150, I think we've been fine for now.

Okay. Thank you.

You're welcome.

Thank you, Michael, for that question. And the last question is coming from the line of Mark Gabriel from Bank Health Land. Mark, you're now unmuted. I'm going to ask you a question.

Hi, good morning. And I got well tuned for Bukat as well from my side. Thank you. First of all, could you give us a split of the icing salt business between the U.S. and Europe in terms of volumes? That would be helpful.

So, the, you mean for the first quarter, right? Not in general. The first quarter, the first quarter sales volumes in Europe were about 200,000 tons and the rest comes from the Americas. I mean, the Americans have the advantage of having not only a bigger market, but also a more stable market like Canada in there, and this is why this number was bigger there. Okay.

The second question is on the U.S. volumes for the potash business. When are you going to deliver significant volumes on the contract which you signed a few years ago with co-fertilizer or has that already started in a significant volume or could you share some volume figures here? That would be my second question.

No, Mike, they haven't checked any bigger volumes. We had some smaller deliveries, but this would not be visible in the market. And we have now the right product quality And this is what we mean with we use opportunity in other markets if they are there. And the U.S. is certainly one of this. But it's too early to talk about any volume expectations for the next couple of weeks. So let us do the first shipments, and then we can quantify this better.

Okay, thank you. And finally... The EBITDA performance of America, that was a big surprise in Q1, especially when you say in your report that the drop in de-icing salt business has been compensated by earnings from industry and consumer customers. But when I compare the volumes in these two segments, we saw a total of plus 3% and some 3.7% in sales. Well, EBITDA was only up in both segments by 1.9%. And that does not really fit to a 50% drop in the communities business. I mean, I can understand that if you have lower deliveries, that you have lower costs for trucks and for diesel, etc. But what was really the cost effect here, what helped... to bring the EBITDA only down by 5%. That would be great. Thank you.

Yeah, so first of all, the cost flexibility in the U.S. mines is higher than it is in Germany because of labor market conditions over there. And I can only send my kudos to my colleague, Mark Roberts, who has really trimmed this organization to an even bigger... Cost focus. We have done a lot also in SG&A. We have done also a lot in efficiency. What you see when you look at the consumer segment, for example, you see the headline number. You shouldn't forget that there's also the European business in and which had some counter-effects, especially from the de-icing business, and this was also the case in the de-icing business in the U.S., but when you, I talked about this earlier, when you look at culinary, when you look at water and salt, when you look at all these specialty salts with a high margin, with a high margin contribution, this was really phenomenal, and this is how we could cushion the strong decline in the revenues. There was no one-off effect, if you are assuming that.

Okay, thank you. You're welcome. Bye-bye.

Thank you, Mark, for your question. And that was the last question for today. So I will now hand it back to Thurston Burkas for the conclusion of the call.

So thanks, everybody, and thank you for the regards also to Burkas. I will certainly pass this on to him and... I'm proud that we had a pretty good quarter given the circumstances. I think the most important thing is that everybody stays now healthy and safe. And if there are further questions, please refer to our Investor Relations Department. And I just want to say for now, have a good day.

Thank you. That will now conclude today's conference. Thank you for your patience and have a pleasant day.