K+S Aktiengesellschaft

Ladies and gentlemen, I would like to welcome you to our Q1 Teams Conference. And let me directly start with the development of our business on slide number three. After the sale of our Americas operating unit, we defined our new corporate strategy, which states, potash and magnesium products are our core business. The market environment for these products is very attractive. And I would like to point out that potash prices already strongly increased during 2021. In Brazil, prices had already more than tripled to $800 per tonne by the end of the year. Due to uncertainties of market participants regarding the geolot political situation and supply constraints, prices increased even further. And now please turn to slide four. We want to share a closer look at our key figures with you. Our EBITDA increased from 126 million euros to 524 million in the first quarter. The positive effects of higher prices, especially in the agriculture customer segment, more than compensated lower volumes and cost inflation, mainly from freights, energy and material. Even with a weather-related below-average de-icing salt business, we could slightly increase revenues in the Industry Plus customer segment. KplusS not only translated the strong operating performance and favorable market conditions in higher earnings, but also in significantly higher cash flows. the adjusted free cash flow increased from minus 15 million euros in the first quarter of 2021 to almost 300 million euros. Deducting the measures we have already implemented to utilize the additional liquidity, the adjusted free cash flow amounts to more than 100 million euros. And these measures were already mentioned in our conference call in March and included the reduction of factoring and the purchase of further CO2 certificates from 2026 onwards. These excellent results in the first quarter further reduced our leverage rate to 0.4 times. And this brings us to slide number five. Following the sale of the Americas operating unit, we took a major step towards significantly reducing our net financial liabilities. By the end of March, only 520 million euros remained, compared with 3.2 billion euros at the end of 2020. Our target is clear. We want to get back to an investment-grade rating. As you can see, our leverage ratio is clearly better than the required level. We take our homework seriously to also be prepared for times with lower potash prices. Now let's take a closer look to our outlook. Yield prospects in agriculture remain intact. They also provide an incentive to increase yields per hectare through balanced use of fertilizers. Not only the prices of various input materials such as fertilizers have risen for farmers, but also the prices of their agricultural products have improved significantly. For important crops such as soybeans and corn, expected margins are above the multi-year average. Furthermore, global inventories for key agricultural products are at historically low levels. Therefore, potash demand is high. The uncertainties about sanctions against Russia and Belarus, however, severely limit global potash supply. And slide seven shows that Russia and Belarus account for 32% of global potash production. While we can be quite sure that almost no material is leaving Belarus, it is not clear what volumes are exported from Russia. Apart from the short-term constraint on supply, it should be noted that most projects for capacity expansions are coming from Russia and Belarus. And these are likely to be at least delayed due to the current situation. That's because of financing has become challenging for producers and required materials or contractors originate from other European countries. At the same time, Russia and Ukraine are important suppliers of agricultural products. As large portions of these volumes are likely to disappear this year, maximizing yields through balanced fertilization by remaining farmers becomes even more crucial to the world's food supply. And therefore, market conditions remain positive. This brings me to our EPDA outlook on slide eight. At this point, I repeat that it is unbelievable for me to witness another war in Europe. I am still hoping for a quick end. The situation is confusing and dynamic. Our revenues in the affected regions are very low and we do not have any assets here. All figures I am presenting regarding outlook assume unrestricted production in the further course of the year, so no downtimes caused by potential disruptions in the gas supply. The current situation makes it impossible to reliably assess the security of energy supplies. In our ad hoc notification of April 13, we raised the expected EBITDA to 2.3 to 2.6 billion euros. Even our prior outlook of 1.6 to 1.9 billion would have been the best result in KplusS history. The strong increase in prices for our products in the agriculture customer segment more than compensate for cost increases in all areas, energy, logistics and material. Assuming capex of a good 400 million euros, this is expected to result in free cash flow of 1 to 1.2 billion euros before one-off effects. As indicated, we plan to use around 230 million euros of this for the repayment of our factoring program and the early purchase of CO2 certificates. Almost 200 million euros of this were already paid in the first quarter. Ladies and gentlemen, and now please turn to slide number nine. On the energy price side, we were very forward looking for our production sites and secured attractive terms even before the outbreak of war. We obviously depend on the reliable supply of natural gas like almost all industrial operations in Germany. The processing of the crude salt as well as the generation of heat and electricity at our production site is based almost entirely on natural gas. Only our winter site on the Werra plant is mainly supplied with energy by a waste-to-energy plant. A cutback in the supply of natural gas in Europe would lead to supply bottlenecks in the German industry, including for critical infrastructure. Our products are used as fertilizers for agriculture, as an intermediate for the chemical and pharmaceutical industry, and as food and animal feed. We therefore make a system-relevant contribution to society. If, however, our gas requirement cannot be covered, this will lead to production restrictions. Against the background of the Ukraine crisis, however, one thing becomes apparent. The strategic decision of KplusS to build the new potash plant in Bethune in Canada and therefore to diversify our production regionally is clearly confirmed. Bethune is not only an example for risk diversification, it also represents our most efficient and largest growth project. With slide number 10, I would like to go back to our corporate strategy. We have always made clear that the largest management focus is on optimizing the existing and announced what we will provide regular updates on projects. As such, I would like to further comment on the ramp up in Bethune on slide number 11. We do have strategies for all our sites. Considering the high free cash flow expected for this year, we have decided to increase the Bethune expenses budget for 2022 by 50 million euros. These additional expenses do not only target the short-term accelerated duration, but proactively also the longer-term ramp-up of the site. This requires primarily engineering, operations and IT services to raise the development status of the further expansion stages. In total, we aim to hire more than 70 additional people for the project this year. However, please do not expect the ramp-up to increase by more than 50,000 tons to 150,000 tons as of next year. On the next slide, I will comment on the other planned uses of the cash we will generate this year. Beside the ramp-up in Bethune, I already mentioned the repayment of factoring and the early purchase of CO2 certificates. In addition, we will propose to the Annual General Meeting to pay a dividend of 20 cents per share, which corresponds to a total of 38 million euros. A further step towards debt reduction will be taken in June, when the bond matures that we are not planning to refinance. The final bullet point on the slide is very important to us. At times when a war is raging in Europe and its impact cannot yet be assessed, it is important to keep the balance sheet robust with low debt levels to steer the company through uncertain times. Overall, K plus S had a very successful start into the year, and the market environment remains attractive. And this brings me to the end of my presentation. Thank you for your attention, and we are now looking forward to your questions, and I hand over to Julia for some technical details.

Yes, thank you, Dr. Lohr, and hello also from my side. Before we start with Q&A, a few technical notes. This conference is webcasted live and a replay of the webcast will be available on our website afterwards. If you would like to ask a question, please use the hand signal and write your name and the name of your research house in MS Teams chat function. We will then call you individually and you can address your question to us live. Please switch on your camera. One more request as usual. We would like to answer your question one by one. So if you have multiple questions, please ask one question at a time and we will answer it first. After that, you will have the opportunity to ask further questions. This brings us to the first question of Christian Veits. You are muted.

Good morning, Julia. Good morning, Burkhard. Two questions, if I may. So first question first. With NPK customers not being able to take volume in Q1 or sufficient volume due to nitrogen unavailability, has this changed in the meantime? And also, what do you make of the stories of farmers taking pothead holidays demand destruction on the pharma side due to high fertilizer prices, etc. Is this actually evidenced by your salespeople who talk to their customers on a regular basis, or is this just a myth and demand continues to be high because pharma affordability is clearly there?