K+S Aktiengesellschaft

Good day, everyone, and welcome to the KNS second quarter 2025 earnings call. My name is Lucy, and I will be your webinar host. Please note that all attendees are currently in a list until the Q&A portion of the call, at which point you'll have an opportunity to ask your questions. I will now hand over to Julia from KNS for some technical notes.

Ladies and gentlemen, also from my side, welcome to our call. We hope you've had a chance to review our posted slides as well as our Q2 documents available on the website. After the opening remarks by Christian Meyer, we will jump directly into the Q&A session. Some technical notes, as always. Please refer to our disclaimer on page 2 of the presentation. A note on backup privacy. Please be aware that the team session will be recorded, webcasted, and available as an audio replay on our homepage. People who ask the question in the team session should be clear that by switching on their camera and microphone, they flee to the recording and replay of video and audio sequence. Now, I'd like to hand over to Christian Meyer, our CEO, for the ultimate remark.

Thank you, Julia, and welcome from my side as well. I would like to start with some explanations about our two-hour talks in context with our two tools, learnings, really. Starting with the first ad hoc. On July 14, we had to publish an ad hoc on an impairment of assets. This impairment negatively impacted our Q2 group earnings and ROC. According to IFRS, we must compare our book value, which is the capex spent on assets minus regular depreciation, to our DCF framework. If the DCF value is above the book value, our maximum asset value is the book value. This leaves room to cope with changing estimates and prices to change rate or value. If the GCF value falls below the book value due to an estimate change, our asset value will be regulated by the GCF value, which likely fluctuates every quarter. Therefore, our annual reports always include sensitivities for the impact of changes in the different estimates. The last time our DCF value temporarily fell below the book value was in Q3 2020. At that time, we had to write off 2 billion euros. Already nine months later, the DCF value exceeded the book value. This required us to write back our assets to the book value. Our competitors' reporting is very different. According to US GAAP, our competitors must write off assets, but not write back. So these fluctuations won't be visible in their financial reports once they've been written off. Our impairment was mainly caused by the weaker US dollar, with the biggest impact on the DCF value now falling below the book value. We now use a rate of 1.20 per euro in our 150-year DCF model, up from 1.10 US dollars per euro. The future reaction of potash producers and customers to the weak US dollar against most currencies remains to be seen. These effects were not yet reflected in the external potash price studies by Argos, used for the impairment test. Additionally, BHP's announcement of their delayed production start came after our approach and is, therefore, not reflected in Argus price curves. Once we have decided on the long-term exchange rate, applying it to a BCS is faster than analyzing quarter and updating the forecast. The good news is that this impairment on group level will not have a significant impact on K plus S activization individual financial statements according to HCV as of December 31, 2025. Therefore, from today's perspective, our ability to pay dividends is not at risk. Now some details on the second article. On July 29, we published an ad hoc with details on Q2 full-year FBTA and free cash flow. Despite missing Q2 and having a weaker US dollar-euro estimate, an analyst assumed we could confirm our full-year output. Second quarter FBTA was below the prior year and your expectations. This was driven by the one-off related to long-term mining provisions lower sales volumes due to postponed shipments and the planned earlier start of resume maintenance, and the US dollar-euro exchange rate impacting earnings despite hedging, especially due to receivables needing to be evaluated with a spot rate on the reporting date. Let's turn to the full year outlook. We are very happy that since the previous forecast was published, cottage prices have have continued to rise moderately. Therefore, we confirmed our previous expectations for the full year despite a weaker US dollar for the remaining months compared to our previous outlook and your expectations. We still expect EBITDA to range between 560 and 640 million euros with a slightly positive free cash flow. For the midpoint of the EBITDA guidance, we assume that the average price level achieved in all regions and for all product groups remains stable during the second half of the year. For the upper end of the range, prices would need to increase further. Just to give you a sense of the phasing of figures for the rest of the year, keep in mind that Q1 and Q4 are our strongest partners due to seasonality in both business segments. As a maintenance water, Q3 typically has the weakest FETA contribution. Last year, it contributed 65 million units. We will see positive price effect in Q3 year on year, but we will also see higher personal costs due to this collective bargaining agreement, as well as higher energy costs and negative FETA effects. I'm looking forward to answering your questions together with my colleagues, Yen and Julia, and I will now hand over to the operator to start the Q&A session.