K+S Aktiengesellschaft

Welcome to the K plus S conference call regarding the publication of the quarterly report Q320 hosted by Dr. Burkhard Loh, CEO. For the duration of the call, you will be on 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 will be connected to an operator. Please note, on page two of the presentation, you will find the disclaimer. I am now handing the call over to Dr. Burkhard Loh to begin. Please go ahead.

Thank you very much. Ladies and gentlemen, welcome to our Q3 call, and let's start right away with slide number three. Decide difficult market conditions. Q3 was another season's quarter. Due to lower potash prices in agriculture, we lost a good 50 million euros compared to the previous year. We were able to partly compensate this decline by showing the strong operational performance of our clients, 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 and second quarter, We had a COVID-19-related burden of around 10 million euros for employee protection measures and to ensure production. As already indicated in August, we were able to more or less compensate for these efficiency losses for the year as a whole with actions from our package of measures. We were therefore able to increase EBITDA from 88 million euros last year to 96 million. On the back of the lower cash capex, free cash flow has also improved to a negative €116 million. Of course, on a net profit basis, the non-cash asset impairment resulted in a significant loss of almost €2 billion in the quarter. Now turn to slide four, please, to have a closer look at the agriculture customer segment. As expected, demand in agriculture was good in the northern hemisphere and Brazil in the reporting period. The tent situation in Southeast Asia has started to improve. This also takes off pressure from the European market. Prices for our fertilizer strategies remain largely stable. And we expect the price recovery to continue in most overseas regions as producers are widely committed until at least the end of the year. Please turn to slide five to have a closer look at the community's customer segments. In total, the ising volume in the second quarter were about 30 percent below the level of the previous year. largely due to high stock levels of our customers at the beginning of the billing season. However, since we have multi-year contracts with many customers and fixed prices, we only assume slight to moderate price decreases overall. Please turn to slide six to have a closer look at the industry and consumer customer segments. Some subsegments, such as food sold for hotels and restaurants, or chemical source for the automotive industry are affected by the corona pandemic. Other sub-segments have benefited. The described one-off effect from our package of measures, a significant improvement in operational performance, high cost discipline, and an optimal use of our logistics network also contributed to the positive earnings development. Revenues we lost in food sales in the B2B area were more than compensated for by the demand in the consumer-customer segment. We continue to see a strong demand for stay-at-home products, for example, table soles, water softening, and pool soles. This shows the robustness of the business has improved during the corona pandemic. And now please move to our outlook on slide seven. For 2020, we continue to expect EBITDA of around 480 million euros, including one-time restructuring expenses of up to 40 million euros. We continue to expect free cash flow around the break-even point with this EBITDA guidance. Due to the impairment, EBIT and group earnings after tax will be strongly negative in 2020. Please turn to slide eight. We adjusted our long-term assumptions of potash prices as well as higher cost of capital. Based on the current potash price level, we continue to expect sustainably rising prices in the short and medium term. The assumption for long-term price development is now lower than previously assumed. Overall, this results in a one-off asset impairment in the Europe class operating unit of around 2 billion euros. However, this measure does not lead to an outflow of liquidity and does not change the indebtedness. With this measure, we have cleaned the balance sheet and thus have more room to realign the company. Please turn to slide nine. Ladies and gentlemen, as you can see from our October report, we have reached an important milestone. The signing for the sale of our Americas operating unit to Stone Canyon Industry Holdings marks inventory and affiliates at 3.2 billion US dollars. As the currency risk is now fully hedged, we expect net proceeds of around 2.5 billion euros. The closing is expected in summer next year. On slide 10, I would like to briefly outline how we are setting K++ up for the future. First of all, I would like to state that our business model is intact, which has been also proven during the corona pandemic. There are no substitutes for potash and other minerals in our portfolio. They are essential for feeding the world population. The megatrends such as rising population and less agricultural land per hectare are still valid and clearly speak for an increasing demand for fertilizers. The sale of the operating unit Americas is an important milestone to deliver the company. We are currently developing our new vision and strategy. The following targets will be part of it. One important goal is that our plant in Germany and Canada will generate sustainable cash in the future, even with low potash prices and green winters. We will reach this with an optimized production footprint and an optimized product portfolio. Due to our improved financial situation, we will also have sufficient headroom to grow in specialty. Ladies and gentlemen, this concludes my presentation, and we are ready to take your questions one at a time, please. Operator, please open the line for our Q&A session.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you change your mind when you ask 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, we will move to your next question. You will be advised when to ask your question. The first question comes from the line of Christian Faith from Kepler Chevroo. Please go ahead.