K+S Aktiengesellschaft

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Welcome to the K&S second quarter 2025 earnings call. I will now hand over to Julia from K&S for some technical notes.

Ladies and gentlemen, also from my side, welcome to our call. We hope you've had the chance to review our posted slides as well as our Q3 documents available on our website. After the opening remarks by Christian, 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. And then a note on data privacy. Please be aware that the team session will be recorded, webcasted, and available as an audio replay on our homepage afterwards. People who ask a question in the team session should be clear that by switching on their camera and microphone, they agree to the recording and replay of video and audio sequences. Now, I'd like to hand over to Christian, our CEO, for the opening remarks.

Thank you, Julia, and welcome from my side as well. Starting with the quarter, third quarter EBITDA was above the prior year quarter. Firstly, this was due to better prices in both customer segments. Last year's EBITDA was affected by a drawdown in inventories, which did not occur this year. This resulted in a positive EBITDA effect. Thirdly, our hedging brought us to a total positive FX effect, which was better than last year. Q3 free cash flow could also be increased from 24 to 37 million euros. Regarding our full year guidance, we confirm the midpoint of our previous guidance range and now expect EBITDA to be between 570 and 630 million euros. The expectation of a slightly positive free cash flow is confirmed as well. For the midpoint of the EBITDA guidance, we assume that the average price level currently achieved in all regions and for all product groups remains stable during the rest of the year. This would reside in a full year ASP of 330 euros. Although we are highly committed regarding our potash deliveries, until the end of the year we still have some flexibility regarding the exact product mix furthermore we assume normal winter weather normal production as well as a us dollar euro exchange rate of 1.18 and the gas price at 36 euros for 30 open position in q4 we would reach the upper or lower end if these factors in combination developed in our favor or against us. I'm looking forward to answering your questions together with my colleagues Jens and Julian, and I will now hand over to the operator to start the Q&A session.

Thank you very much. At this time, we will conduct the question and answer session. If you'd like to ask a question, please click the raise hand icon at the top of your screen to enter the queue. Once selected, please start by stating your full name and company affiliation. KNS would like to answer your questions one by one. So if you have multiple questions, please ask one question at a time, and KNS will answer it first. After that, you have an opportunity to ask further questions. Once again, if you'd like to ask a question, you can click the raise hand icon at the top of your screen or pause here to allow questions to be generated. And this brings us to our first question from Christian. Christian, please start by stating your full name and company.

Yes. Hi. Thanks for taking my question. Christian Feitz here, Kepler Schiffer. Good morning, Christian, Jens, and Julia and team. Congrats on the results in a difficult time, low season period. A couple of questions, please. So my first question would be your DNA in Q3 was significantly lower than in previous quarters. I assume this is in context of the impairment you took per Q2, correct? And which DNA level should be modeled in going forward?

Yes. Hi. Good morning, Christian. You are absolutely right. The lower DNA is based on the impairment that we had in Q2. So, the base level now is much lower. So, the current level that you could calculate for the other quarters.

Okay, great. And my second question is, any news regarding the progression in talks about the tailing pile coverings?

Yeah. So, we postponed the roundtable discussions and now went further in a smaller group with the local municipality and the citizens initiative. And the aim now is to focus on reliable measures which we can implement and also put in all the procedural applications. And now the discussions are ongoing and we are still confident that we will find a solution.

This is for Neuhof, I assume. Yes. Okay. And last question. what is the current run rate of annual production in Bethune, and where do you see Bethune gearing up to by the end of 26 in terms of production?

So in the current level, we expect a little bit more than 2.2 million, and in the next year, we have big maintenance, and that's why we have a little bit more than this year, but not much more than next year. But that's based on the long maintenance period. That's every three years. Okay, great. Thank you.

You know that we always plan by 100 to 150,000 homes, and next year will probably rather be a 100,000 homes year.

Okay, great. Thanks, Alistair, to all of us.

Thanks, Christian. Thanks. Thank you very much. Our next question comes from Sebastian. Please go ahead, Sebastian.

Hello. Good morning. I'm Christian . I have two questions, please. The first is on the volume outlook for the group as a whole for 26. It looks as if the group quite wisely cut some of the more commoditized volumes and went more for specialty. But I'm thinking about implications for next year. We have, as you mentioned earlier to Christian, a little bit of maintenance at Bethune. Is 7.4 million tons a reasonable baseline, or are there any one-off effects? And how do you think of agriculture? And how do you think about volume growth, if any, moving into 26? Because if we have some maintenance at Bethune, additional ramp-up of specialties at the MOP market, let's say, remains a bit more challenging. Is there any volume growth at the group level in the year?

Yes. Good morning to Bethune. It was very important. The final volume finally depends on the product mix. If we have some more specialties compared to MOP, then the ones are a little bit lower. But from today's perspective, we expect a little bit more volumes for the next year. So growth of at least around about 100K tons.

That's helpful. Thank you. And can I ask about the salt business? The pricing has been, very helpful over the last few years, I think it is safe to say. Are there any signs that the pricing for the icing salt or salt-like products more broadly is starting to flatten out or in some cases decline, or that's not the case?

From today's perspective, not really. That finally depends on the weather conditions in the winter. If it's a pretty warm winter, then it could be that it's a little bit lower, but you should keep in mind that We are selling the over the whole year. So more than 1 million tons already sold. And so the rest finally depends on the weather conditions. If it's pretty cold, then the prices are better. If it's warm, then a little bit lower. But the general price level should be the same.

That's so helpful. Thank you for taking my questions.

You're welcome, Sebastian. Thank you very much. Our next question comes from the line of Michael. Once again, a reminder to all to remember to state your full name and company affiliation.

Yeah, thanks. Good morning, all. This is Michael Schaefer speaking from AutoBHF. Two questions from my side. The first one is more on the general market conditions in the Polish market. Initially, in 2025, we discussed a lot about production curtailments in Russia and Belarusia. So obviously helping to bring potash prices up. But if you look into rail shipment statistics year to date, October, we see that basically volumes are up 10%. So my question is, how do you see, let's say, the supply side from Russia and how we should think about, let's say, going into 26 from this source and what this is doing to the potash market environment in general in 26 from your perspective? That's my first question.

Yes, with Belarus and Russia, they are back on the pre-war levels and increased their volumes a little bit. But the main or the most important answer is that there's the demand and that regardless of these additional volumes, we saw increasing prices. For example, also for the cross-border deliveries to China, but also if you have a look to Brazil over the last 12 months, We have a much higher level in Brazil. And for the next year, we will see in the spring season when the demand comes from every region globally, that we will see how tight the market is. So we expect still a good demand for next year. And if the supply, we will see if the supply is able to fulfill this demand in the spring season.

Okay. Second question is more related to KNS specifically. on the major building blocks for your cost items, major cost items in 26. So, can you just remind us on how you mentioned the 36 price assumption for natural gas in the fourth quarter. So, but how in general should we think about those energy costs and personnel, what to expect in 26 compared to 25? Yeah.

We expect that the cost level will be more or less stable. With regard to the personal cost, you should keep in mind that the bargaining agreement was in place since the second quarter of this year. So the next year, we have in the first quarter a higher level compared to this year. But the bargaining agreement will run until the end of the next year, so there will be no additional increases. And with gas, we already had drawn about 70% for our gas consumption and that's a little bit below 40 euros of the action position.

Thank you.

Thank you very much, though. Thanks. Our next question comes from the line of Tristan. Tristan, go ahead, please.

Hi, Tristan, Deutsche Bank. I'm just wondering about Q4 and your ASP assumptions. I think you said 330 for the full year. which implies quite a drop-off in Q4 versus Q3, even if you consider FX. So I was wondering if you could maybe talk through that.

Yeah. So what's very important is that we expect stable market prices from the perspective of today. For example, with the Brazilian prices, it's a little bit weaker currently. And you should keep in mind that the FX effects compared to H1 will also be included in our calculation. And the third thing that we have some seasonality with regard to the product mix. So mathematically, that resides finally in this 330 euros a ton.

Okay, thanks. And maybe second, if you can maybe comment on where you think inventory levels are at the moment in potash in the different regions?

Yeah. In the different regions, we see more or less normal levels. If you have a look at Europe, U.S., and Brazil. If we have a look to China, there we see that the prices for cross-border deliveries increase and that the pot stocks are below the strategic levels of 3 million. They're around about 2 million. And so, at the end, there are normal levels in total, maybe in total a little bit lower than the normal levels, if you see the global market. Great. Thanks very much.

Thank you very much, Dan.

A short reminder, if you'd like to ask a question, you can click on the right-hand icon at the top of your screen to enter the queue. just to state your full name and company affiliation. This brings us to the next question of Angelina. Please go ahead with your question.

Good morning. Thanks very much for taking my questions, and I will have two. The first one is specifically on Brazil and the current market environment. Could you give us a bit more color as to what you're seeing on that market? Because we know that potash is relatively more affordable compared to other macronutrients right now, and demand has generally been good. from Brazil, but still the farmers have seen some challenges from the economic side and their availability to credit has become more difficult. So have you seen any impact on your operations from that and how are you expecting the situation to develop in terms of demand in Brazil due to this?

Yeah, you're absolutely right. The general conditions for the farmers are still good. From our perspective, we optimize our regional mix. So we have some better networks in some other regions currently. So we don't bring too much volumes to Brazil. But the volumes that we are finally export to Brazil, we look pretty close on the payments and that we secure or ensure our receivables. So from our perspective, we don't see a risk for us. And the general pharma conditions are pretty good. So at the end, that's more, yeah, depending on different customers that we have a closer look. But in total, we don't see a risk for us.

Thanks very much. And my second question is a bit of a follow-up to Sebastian's question regarding . So one of the things that we've seen, I think, over the course of the past few quarters, but particularly in Q3, is if you're shifting to more higher margin product mix. And I just wanted to understand, you know, to what extent do you have further potential to shift your product mix that way? Is it mostly done or you still think that there is some addition you can make in terms of SOP or maybe more broadly in terms of premium products?

Currently, we are very happy with the product mix, but there's not much room for more specialties currently.

Understood. Thank you. Yep. Thank you very much, Dan.

It is our next question. It comes from the line of Lisa. Please go ahead with the question.

Hi, this is Lisa from Morgan Stanley. I have one question. Against your expectation for rising potash demand in 2026, as you've just stated, and your comment that Chinese potash inventory is maybe slightly below their normal strategic levels and their domestic production in China being quite restricted, I mean, what are your qualitative expectations for the timing of the Chinese potash contract negotiations and to which extent do you see potential for the price to be settled higher year on year. Thank you.

Now, what's very important to keep in mind, the point I already addressed and you just also addressed, we are not part of the negotiations. That's very important to understand. For this year, everybody expected it won't take too long that we see a Chinese contract compared to this year. So I can't imagine that we will see that in the summer or in the late spring. It should be earlier, but the rumor is in the market, but we are not at the table.

Okay, thank you.

Thank you very much, though.

And if there are no more questions, we will conclude the call.

Okay, yeah, thanks for your questions, and hope to see you on the road in the next weeks, and have a good day.

Thank you. Bye-bye.

Bye-bye. Bye-bye.

This concludes today's article. Thank you, and have a great day.