K+S Aktiengesellschaft

Ladies and gentlemen, welcome to our Q2 call. I would like to start by pointing out the highlights on slide three. Despite difficult market conditions, Q2 was a solid quarter. Due to lower potash prices in agriculture, we lost around 80 million euros compared to the previous year. But we were able to partially compensate this decline by showing a strong operational performance of our plan. to which Bethune in particular made a significant contribution. In addition, we had strong cost discipline and did our utmost to make optimal use of our logistics network. As in the first quarter, we had a COVID-19 related burden of around 10 million euros for the measures to protect all employees and to ensure production. Overall, our EBITDA reached 88 million euros compared to 130 million in the previous year. Pre-cash flow is at minus 43 million euros after the strong figure last year and is impacted by higher capex. Please turn to slide four to have a closer look at the agriculture customer segment. As expected, demand in agriculture was good in the northern hemisphere and in Brazil. In Southeast Asia, demand did not pick up as a result of the corona pandemic and limited availability of workers. New contracts in China and India have led to a restart of product flow and the expected bottoming out of MOP prices in Brazil, followed by slightly rising prices. Prices are still increasing despite higher volumes being absorbed by the market. We expect that this price recovery in most overseas regions will also take pressure off the European market. And price for our special fertilizer specialties remains largely stable. And now please turn to slide five to have a closer look at the community's customer segment. In total, the icing salt sales volumes in the second quarter were almost 30% below the level of the previous year. Largely due to high stock levels of our customers at the end of the winter season, many are in a strong negotiating position in the upcoming bidding season. However, since we have a multi-year contract with many customers and fixed prices, we only assume slight to moderate price decreases overall. In addition, we already signed contracts in some regions with good prices in Q4 2019. And now please turn to slide six to have a closer look at the industry and consumer customer segments. Some products, such as food salts for hotels and restaurants, or chemical salts, are affected by the corona pandemic. Others, such as pharmaceutical business, have more than compensated for these effects so far. Our products for chlorine production show a positive trend as well. A significant improvement in operational performance, high cost discipline, and an optimal use of our logistics network also contributed to the positive burning development. What we lost in food sales in the B2B area was more than compensated for by the demand of the consumer customer segment. The more people cooked at home, the more table sales were bought in the supermarkets. Water and pool sales also saw a very strong demand in Q2. In these uncertain times, customers buy well-known brands that they trust. On slide seven is our outlook for the year as a whole. For 2020, we continue to expect EBITDA of around 520 million euros. As in our last outlook, the figure does not take into account one-time restructuring expenses, which could result in up to 40 million euros. Including this one-off effect, we would see an EBITDA of €480 million. Due to the high cost discipline and the optimized use of our logistics network, EBITDA of the Americas operating unit is now expected to be only slightly lower than in the previous year, despite significantly lower volumes for the de-icing salt business. We have assumed a moderate decline, We also saw good operating performance in our Europe Plus operating unit, which would help us also in the second half of the year. Furthermore, we have some positive effects from our package of measures. These effects allow us to compensate for the slower recovery in POTUS prices, opposing currency effects from a weaker US dollar, and COVID-19 related deficiency losses. We continue to expect free cash flow around break-even point with this EBITDA guidance, also because the biggest part of the restructuring expenses will not be cash effective in 2020. And I'll please turn to slide eight. Ladies and gentlemen, at this point, I cannot tell you anything new about the sales process of our America's operating unit. You may have heard more details about this sales process in the news, but please note we do not comment on market speculation. However, we still expect signing this year, and you should see that as positive news. On slide nine, I would like to briefly outlook what is important for the new K-plus S. With the sale of the operating unit Americas, a restructuring of the administration is mandatory. The overall target is to have positive free cash flow contribution from every side, even in difficult market conditions. The Europe Plus operating unit and the holding company will be formed into a leaner and smaller K plus S with a focus on fertilizers and specialties. The future organization enables the budget reduction for SG&A functions by €60 million from 2021. In the future, KplusS will work in a functional organization with an operational management team. The executive board will be supported by 15 direct reports. Without the Americas operating unit, there were 36. The future direct reports are named, and the design of the functions is now defined. At the same time, negotiations with employee representatives started. The expected restructuring expenses could be up to 40 million euros. The reorganization should be completed by the beginning of 2021. I'm convinced. that the realignment of K plus F will result in a leaner and more performance-oriented company, one that will have a solid financial base for future growth. And now please turn to slide 10. Ladies and gentlemen, the situation would certainly be much better for us with higher potash prices for sure. We have to focus on everything that we can influence, and to this end, we are making really good progress. We have finally achieved our potash production targets. Our German plants are unaffected by wastewater-related shutdowns, the nutrient content is good, and the food continues ramp up thanks to improved product quality. We were also able to cut costs significantly by optimizing the use of our logistics network. The OU Americas transaction and the realignment of the new K++ are on track. Something I would like to add here, we have just reached an agreement with the KFW Bank for a syndicated credit line of 350 million euros at market conditions. This will help us if there are any additional unforeseen burdens coming from the Corona pandemic. Ladies and gentlemen, this concludes my presentation, and we are ready to take your questions, and one at a time, please. Operator, please open the line for the Q&A session.

Thank you. Thank you. If you would like to ask a question on today's call, please press star 1 on your telephone keypad. If you change your mind and wish to withdraw your question, please press star 2. As a reminder, if you would like to ask more than one question, please submit one question at a time. Once answered, we will then move to your next question, and you will be advised when to ask your question. Our first question comes in from the line of Christian Phipes, calling from Kepler. Christian, please go ahead.

Yes, good morning, gentlemen. Good morning, especially Dr. Law. Glad to see and hear you're back. Three questions, please, so one by one. First of all, how has the Brazilian application season started in Pradesh, obviously?