K+S Aktiengesellschaft

Welcome to the K plus S conference call regarding the publication of the quarterly report Q1 21 hosted by Dr. Burkhard Loh, CEO and Torsten Becker's CFO. 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'll be connected to an operator. Please note on page 2 of the presentation, you will find a disclaimer. I am now handing the call over to Dr. Berhard Lohr to present the figures. Please go ahead.

Thank you, operator. Ladies and gentlemen, welcome to our Q1 call. Before we start with the Q1 results, I would like to comment on our latest achievements. Contrary to the expectations of some observers, we completed the sale of our North and South American salt business to Stone Canyon Industries on April 30th. K++ has implemented the most decisive component of the package of measures announced in December 2019. This is an important milestone in the planned reduction of debt. The net proceeds of around 2.6 billion euros will be entirely used to reduce debt. Accordingly, the level of indebtedness will improve significantly. The enterprise value amounts to 3.2 billion U.S. dollars, corresponding to a 13.4 times 2020 EBITDA, and the amount was paid entirely on the closing date. Mark Roberts left the company with clothing. We would like to thank Mark for his significant contribution during the course of his 29 years career with KplusS. As a dedicated leader, he played a decisive role in shaping KplusS and we wish him success in the future endeavors and all the best personally. Since April 1st, Holger Riemsberger has been responsible in the function of COO. We welcome Holger and look forward to working together with him. And now, ladies and gentlemen, let's turn to slide four for the Q1 results. Looking at the results of the continuing operations, we achieved higher revenues and a higher EBITDA year on year. Although we have seen strong price increases on MOP especially since the beginning of this year, our average selling price in agriculture was slightly below the level of last year's Q1. Due to the favorable winter weather, we achieved a strong increase in de-icing volumes by 1.1 million tons to 1.3 million tons in the first quarter. Strong demand and higher product availability also resulted in increased sales volumes by 100,000 tons in the agriculture segment. Higher freight rates and energy prices could be more than offset by strict cost discipline and positive effects from currency hedging. Following our impairment on potash assets last year, we will see value fluctuations on the assets quarter by quarter. Because of higher potash prices, we increased the value of our potash assets by 180 million euros. This was the reason for a strongly increased adjusted net profit. Q1 free cash flow was burdened by higher funds tied in working capital as well as the cash out for the SCNA restructuring project after being boosted by the sale and lease back of the office building in Kassel in Q1 last year. Accordingly, it amounted to minus 15 million euros. Now please turn to slide 5 for a closer look at the agriculture markets. Since summer 2020, we have observed significantly rising prices for the main crop commodities. This was due to poor global harvests last year, notably in China. Consequently, falling stock-to-use ratios, mainly on corn and soybean, have triggered this price development. With higher agriculture prices, farmers' incomes and their prospects have risen significantly. Although with strong demand, farmers switched from a cost-minimized to a volume-optimized mindset with very good affordability. Please turn to slide six. Following the very good market conditions in agriculture, we have seen a continue to see strong demand for potash fertilizers in more or less all global markets. We now expect global potash sales in 2021, including 5 million tons of specialties, to reach a record level of between 74 and 76 million tons. Especially the price for granulated MOP in Brazil has risen by more than US$100 per ton since the beginning of the year. The Indian contract price of US$247 per ton agreed at the end of January was adjusted to $280 per ton only two months later. This adjustment was made after the announcement by the main potash producers to refrain from supplying at the initially low contract price, which didn't reflect the market situation. Because of the new India contract, prices in the other Southeast Asian markets also increased. With further increasing product availability from our Bethune mine, we can also benefit from the high price level in the U.S. Therefore, our flexibility as only potash producer with production sites in two continents is paying off. We started with a strong performance of our de-icing salt businesses in Q1. Already in January, the winter weather in Europe was above average, and especially in February was a record month in terms of the icing sales volumes. Even at the beginning of April, we had cold days with snow and night frost. We are therefore confident to see good early field business in the next month as well. In our pharmaceutical applications and products for the food industry, we saw COVID-19-related lower demand in Q1 compared to a normal year without pandemic impact. At the same time, the chemical industry recovered strongly, and we benefited from higher sales volume. With further increases to consumer products, executed the already strong business from last year's Q1. Now please move to slide number eight. We now come to our outlook for the current year 2021. I already described the positive market environment for fertilizers. We are therefore optimistic of achieving moderately, not only slightly, higher average prices for our agriculture product portfolio year on year. We continue to expect sales volumes in agriculture to rise. After a good winter, we expect more than 2.6 million tons of de-icing salt sales for the year as a whole. And the notable savings of the SG&A restructuring cannot fully compensate for the overall rising costs, especially for freight and energy. Currency effects will also have a negative impact. Overall, we expect EBITDA from continuing operations to increase to a range of 500 to 600 million euros in the current year, which is 60 million more than in our last guidance. This continues to include the one-off book gain of around 200 million euros generated at the closing of the REX joint venture. Our adjusted free cash flow, including the cash in from the sales of the Americas operating unit, will be significantly above 2 billion euros. Our free cash flow without these proceeds for 2021 is still expected to be negative. Please turn to slide 9 for our all-new strategy. We revised our vision and mission, including our mission statement. On this basis, the ongoing strategy process has been launched. Our aim is to complete it by late summer of this year. Today, I will therefore focus on the key aspects of our strategic work guiding us. Our new mission statement is, we enrich life for generations. This clearly demonstrates our commitment to making the great resources of nature available in an environmentally responsible way to create value and health for people. Our range of products and services will be developed for generations to come. The following five principles reflect our approach, and therefore please turn to slide 10. We ensure nutrition, health, and safety. We enable the success of our customers. We are committed to sustainable mining. We leverage our unique infrastructure for economic efficiency, and we act as a partner with our communities. In developing our new strategy, we are focusing on the following four key aspects. First, we will make our existing business even more robust. By 2023 at the latest, we want to be capable of generating a positive free cash flow at each of our production sites, even at low potash prices. We are not only focusing on cost efficiency, but also on optimizing our product and regional mix. First methods will already have been implemented by 2022. from 2023 on, our capital expenditures will also stabilize again. This year and next, however, will be once again have to face high environmental expenditures, mainly due to tailings past diet extensions. Second, we will continue to further develop our existing business, for example, in the fertigation business. Third, we will tap into new business areas. For this purpose, we want to leverage our unique infrastructure in particular. Our future joint venture REX is already impressively demonstrating the potential of this approach. And fourth, our climate strategy. Over the past 30 years, we have succeeded in reducing our CO2 emissions by around 80%. By 2030, we have set ourselves the target of reducing our CO2 emissions by a further 10%, using our own resources. At the same time, production is set to rise. Technically, we are able to reduce CO2 emissions to zero, but this requires a competitive price for green energy. Ladies and gentlemen, this concludes my presentation, and we are now happy to take your questions as usual, one by one, 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 and wish 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, we will move on to your next question, and you will be advised when to ask your question. Our first question this morning comes from the line of Christian Feitz from Kepler Shetra. Please go ahead.