K+S Aktiengesellschaft

Good day and welcome to the K plus S full year 2025 earnings call. My name is Barbara and I'll be your Evercall webinar host. I would now like to hand over to Julia from K plus S for some technical notes. Julia, you may now begin.

Ladies and gentlemen, also from my side, welcome to our call. We hope you had a chance to review our posted slides as well as our full year documents available on our website. After the opening remarks by Christian, we will jump directly into the Q&A session. Some technical notes. Please refer to our disclaimer on page two of the presentation. 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 Meyer, our CEO, for the opening remarks.

Thank you, Julia. And welcome from my side as well. Starting with the quarter. Q4 EBITDA was 17% above the prior year quarter. Therefore, we reached the upper half of our full year guidance range. Firstly, this was due to better prices in both customer segments. Secondly, EBITDA was affected by a higher drawdown in inventories than last year. This resulted in a negative EBITDA effect, which was overcompensated by a positive FX effect due to our hedging. Full year free cash flow reached 29 million euros. Full year capex, 546 million euros. In accordance with our dividend policy, we pay out 43% of our free cash flow and therefore propose a dividend of 7 cents per share to the AGM. In the Q4 impairment test, we saw a value recovery over 484 million euros. Just to remind you, As long as we remain below the book value, there will be fluctuations with even minor changes in the parameters due to the long term of the valuation models. Regarding our full year guidance, we expect global potash demand to rise again this year, following full capacity utilization in 2025. Potash prices are tangibly higher year on year, which will benefit Q1. Further developments will depend on the course of the spring season when demand from many regions must be met simultaneously. Demand for non-deicing products in the industry plus customer segment is also likely to develop positively overall in the current year. Here, we continue to expect moderate price increases for our soil products. You have all witnessed the exceptional and prolonged winter weather. we experienced in January and February throughout Germany and large parts of Europe. This has resulted in a significant upturn in our de-icing soil business. Therefore, we expect significantly stronger sales volumes than in 2025, assuming average winter weather in Q4 2026. We expect EBITDA to range between 600 and 700 million euros. This translates to a midpoint above the 2025 level due to higher potash prices in Q1 and the strong de-icing soil business. Free cash flow should at least break even again despite elevated capex. For the upper end of the range, we would need an agricultural volume of 7.6 million tons, excluding trade goods, and a moderate price increase for MOP in Brazil during the spring season. This has to spill over into other regions and product groups and hold up during the second half of 2026. The lower end would work with a volume of 7.4 million tons and prices at the level of the end of 2025. Just to give you some thoughts on the first quarter, we should see a better EBITDA than in 2025. We anticipate positive effects from our strong start in the de-icing soil business and higher potash prices. However, negative effects arise from the fact that Q1 is the last quarter with an effect in the year-on-year comparison due to the collective bargaining agreement, as well as from the significant inventory buildup that benefited Q1 last year. In closing, I would like to briefly outline the outlook for the future beyond 2026. We will position Kplus S as efficiently as possible in terms of resource allocation, structures, and processes to make the company even more robust also regarding costs. We also want to direct attention to our second pillar, the soil business. In addition to the potash business, The European salt market has undergone structural changes due to the permanent loss of Ukrainian capacity. Therefore, I would like to clearly state that salt belongs to our core business. We are focusing on operational improvements as well as further developing our product portfolio and market position. Now, I'm looking forward to answer your questions together with my colleagues, Jens and Julia. And I now hand over to the operator to start the Q&A session.

Thank you very much, Christian. A few technical notes from our side. Can you ensure that if you want to ask a question, can you ensure that you press the raise hand icon located on your Teams app, just at the top of your app? And once you select to ask a question, can ensure that you cite both your name as well as your research house. And another request, KS would like to answer your question one by one. So if you have multiple questions, please ask one question at a time, and KFS will answer it first. And after that, you have the opportunity to ask further questions. This brings us to our first question. It comes from Christian. Christian, your line is open. Can you ensure that your device is unmuted and you may proceed with your question? Make sure that you announce your research house. Your line is open, Christian. You may proceed.

Yes. Good afternoon, Christian, Jens, Christian and Julia and team. Just two questions. So I'll ask the first one and then wait as asked for. So looking at weather data, we had actually... Can you hear me?

Can you put the camera on, Christian?

I can't put the camera on for some reason.

No, I cannot.

You can try, Christian.

I believe that your camera has been activated.

Now you can see me in all my beauty. Thank you. So, yes, first question. So I believe looking at current weather data, we had a relatively early start to the, let's say at least a growing season in Europe, in the Northern hemisphere. What are your sales people telling you about current demand? How that is happening? And also, can you maybe make some comments about in that context, farmer profitability, farmers are squeezed. I know that farmers are complaining all the time, but they are complaining. So how is Potash demand panning out at this point in time? Thanks.

Yeah, so the Potash demand there we see a good demand as our competitors announced that they are fully sold out for the first quarter. Okay, it's already at the end and that's also the situation for us and also for the first weeks in the second quarter there we also have a good demand and that we see more or less globally. And the affordability of the farmers, that depends on the different regions. In general, we can say that the farmers are still earning money with some ups and downs. And if you, for example, see the current palm oil prices, price levels, that's a good and healthy level. And as you know, that's a Polish eater crop. There we see also strong demands. Okay, perfect.

Now, my second question. I believe at the end of the Q3 reporting, you mentioned a planned big maintenance for Bethune for 26. How is that coming along, and can you tell us about timing there?

That's in the summertime. That's every three years. There are three-month maintenance, but we are on a good way to keep the production level or to increase it a little bit compared to last year.

Okay, great. Thanks very much. Thanks, Christian. Thank you, Christian, for your question.

And our next question comes from Ben. Ben, your microphone is open. You may proceed. Can you announce your research house?

Great, thank you. Ben Isaacson and my research house is Scotiabank. Good to talk to you all. I just have maybe a high-level question on just everything that's going on in the Middle East. You know, when we look at Q4, when we look at fall, we started to see a little bit of resistance to potash demand in some markets, whether it was in North America or a little bit in Europe. And so now we look at nitrogen that's kind of not doubled in price, but moving meaningfully higher and presumably other input costs for the farmers such as diesel and whatnot will also move higher. How can we not, I mean, do you not see a scenario where we could actually have potash demand destruction in the back half of the year? And I noticed in your guidance, your guidance said that you've included or your assumptions take into consideration potash what's going on in the Middle East. So maybe you can start by talking about that and, you know, what the guidance have been or how are you thinking about those paths for future demand?

Yeah, maybe make a real general picture with regards to the situation in the Middle East. There are different stories that you can hear in the markets. based on the fact that the fertilizer prices increase, that the energy costs increase. Normally they say that you have a spillover effect also to the crop prices. The crop prices increase and then it's affordable for the farmers and makes sense to apply fertilizers. If the prices are too high, then the farmers won't buy any fertilizers. There you have no clear picture. At the end, I expect that we are still 8 billion people on the earth. There will be a demand for food and that they will apply potash maybe with some volatility. But from our perspective, we don't think that this will have a real big impact on the volumes. because we see a good strong demand in brazil we see a good demand also in asia and in europe and the us we expect a normal level and with regard to the situation in the near east from our position it's important to know that we have a real low exposure in this market. So that wouldn't be a problem to shift or relocate the volumes to other markets. And also for the logistics, from our perspective, as we have sites on two continents, we won't have big impacts, maybe some increases for the oil price for the logistics, for the ships that directly go into the real prices with the formula. But this is an impact for all competitors. So that's not a disadvantage, not an advantage for us. And from the region, that's correct. If you have a look to the street of Hormuz, 45% of the sulfur has to go through the street and it's blocked currently. And also a huge volume of up to 30% of nitrogen is coming from this region. So there are different stories in the market what effect that finally will have.

Yeah. Can I just, just one follow-up and then I'll pass it on This may be difficult to answer, but on a regional basis, can you talk about which farmers or growers are in best shape and which ones are most at risk of seeing pushback, not necessarily to potash from K plus S, but maybe just in general?

Yeah, if you go through the different regions, as I just mentioned, US and Europe expect a normal base. But if you have a look to Asia, especially with the palm oils and so on, the farmers have a good situation. US farmers are not... in a great shape with the sanctions, but I think they will apply potash, but especially based on the high harvest of last year. And in Brazil, we see growing acres of the farmers and also a good demand. So we think that's in line with their profitability. So in Brazil, I would say it's okay, but especially Asia has a positive outlook.

Perfect. That's very helpful. Thank you very much. Thanks. Thank you, Ben, for your question.

And our next question comes from Angelina. Angelina, your line is open. Can we ensure that your device is unmuted? And please announce your house number.

Hello, I hope you can see and hear me okay. It is Angelina Glazova from JP Morgan. I have one question, but it consists of two parts, so I will split it in two. I wanted to ask about your SOP business in Europe. What is the environment in general right now in terms of demand? I think in the context of the Middle East situation, there is an understanding that quite a lot of sulfur comes from the Middle East and from the affected regions, so there is possibly an upside risk to silver prices. And in this context, I was wondering if you think there is room to increase SOP prices in Europe if that happens, just depending on the demand levels, because those prices have been at quite high levels already. And it's not quite clear whether there is room to further increase them.

Yeah, as you mentioned, it's very important that around about 40 to 45% of the global ciphers coming from the Near East needs to go through the Strait of Hormuz. So they are blocked currently, but at present you don't see much increases for cipher prices. But from our perspective, it will stabilize the premium that we had in the past on a pretty good level. And then it depends finally how long it takes. But what's the difference between us and our competitors, the SOP producers? The Mannheim producers have the challenges to get Cypher physically and the risk of where the prices will go. And on the other hand, the higher energy cost will affect their production costs too. That's our advantage from our side, as we have the Seifer already included in the rock salt, so we don't have higher cost for Seifer or the physical deliveries. And with our gas consumption, we already hedged 70% of our gas that we need for Germany.

Thank you very much. That is clear. And the second part is a very quick follow-up. Could you please remind us the exposure of SLP business, maybe both in terms of volumes and also to the extent possible in terms of earning sensitivity to price increases?

Yes. So it is 700 to 900,000 tons. That is the number that we are having. And I mean, therefore, the earning sensitivity is quite clear with that number because price increases directly go through here. And with that 700,000 to 900,000, you know that we can always decide intentionally which way we choose. So if we decide for the so-called SOP max, that just means that we have a lower volume in total, but we would only decide for that if it makes most sense with regards to EBITDA and margin expansion.

And in addition, it's also important to know that the cipher component is also included in ORA-ConCali and in ORA-Kesovit, but on a lower level. The main effect will come from the SOP.

Understood. Thank you very much. Thanks. Thank you, Angelina, for your question. And our next question comes from Michael. Michael, your line is open. You may proceed with your question.

Michael, please ensure that your device is unmuted and also ensure that you quote your house research.

Yeah, happy to do so. Hope you can hear me well. Michael Schaefer here from OdoBHF. Thanks for letting me in here. So I want to come back to your outlook statement on the egg volume. So you are I think projecting an increase compared to last year's level, excluding also trading 7.5 is the lower end, which is even higher than what you reported last year. So I wonder where this is coming from, given where you are also with the maintenance, the major maintenance shutdown in Canada. Can you give us a bit of an indication? So to what extent netback optimization plays a major role in your planning? i.e. more of the specialties maybe than on the potash chloride, which we have seen in 2025. Thanks.

So, Michael, if you compare our outlook that we had given for 2025, you would have seen a 7.5 to 7.7, yeah? So, 7.4 to 7.6 is still not kind of back at the And that is why the increase production-wise is totally possible, yeah, with the 100,000 tons coming from Bethune. And now it's just a question of the product mix, yeah. And we did not reach that 7.5 to 7.7 because we decided for SOP Max, yeah. And now it's the final outcome between the 7.4 and 7.6 will totally depend on SOP min or SOP max, not the increase in BISM. That will come with 100,000.

Okay, good. Understood. The second question is coming back to what you flagged before, i.e. the overlooked sold business, which you have. So let's divide the question into two. Maybe give us a bit of an understanding. You talked about price increases and obviously strong evolution in de-icing. So can you give us a bit of an indication what kind of earnings contribution is we should expect from those, let's say, non-deicing and deicing type of businesses underlying, because obviously you're not reporting that anymore, unfortunately, but just giving us a bit of a color here on the sensitivities looking into 26. Thanks.

Yeah, we are very happy with our salt business. As you know that we are not reporting the figures of... The earnings, but you see it finally from the revenues, the increases and as the cost levels are pretty close the same, some smaller increases, then you can see that our earnings or netbacks are higher. And we have real low capital because the mines are pretty old. The bookways are written down. So you don't even have no high impacts from depreciation, neither from capex volumes. We don't need high capex volumes in this area. So that's a low capital intensity. And, yeah, the volumes coming from de-icing, these are not the highest prices or highest netbacks. So if you have high de-icing volumes, then the average price will go down. That's a normal effect. But in total, the absolute earnings will increase, especially if we are able to sell around about 500,000 tons more compared to last year with the de-icing business. But that has not the effect like a farmer sold.

Okay. Understood. Thanks. Michael.

Thank you very much, Michael, for your question. And our next question comes from Joelle. Joelle, your line is open. You may proceed with your question. Hi.

Joel Jackson, BMO. First of all, thanks for doing a North American-friendly call time. Thank you very much. Just for you, Joel. And Ben. And Ben. Ben across sort of appreciates that. I was interested in your FX assumptions where you're assuming a 1.2 exchange rate for the year, Euro, USD, but we're at 1.15. It makes a big difference on earnings. Can you explain that assumption?

Yeah, sure, we can. So our assumption is 1.20 for the year. And obviously we are hedged on a free cash flow level, but just only to some extent on the EVTA level. So five cents lower exchange rate would end up in 20 million higher EVTA.

So that's the sensitivity.

Sorry. The hedge, how much, I may admit, how much are you hedged this year and at what rate?

Yeah, so we have 70% on the cash flow level, so in the revenues. On the FX. On the FX, yeah. So on the EBTA level, it's around about 50%. And the hedging rate is 1.14 for the worst case, and the best case is 109.

And you're also a 70% hedge for gas. That number is exactly 70%. Okay, just making sure. Okay, second question I have for you is like obviously sulfur is really extended here and might get more extended and we all know why. It was extended before March. Are there ways you can capture more? You've got a free feedstock of sulfur that doesn't come from the Middle East. I mean, is there a way you can creative ways, unique ways you can maximize the value of self you have? Or is that just should we expect the SOP premium over MOP to rise substantially? Are you seeing that from customers? And you mentioned Corn Cali as well. Should we expect that premium to rise going forward?

With the Salfa, depending on the situation, if it finally will spill over to the prices. We have limited access to the Salfa because that's all included in the rock soil and there we are only able to, as you just explained, switch between 700 and 900,000 tons with the SOP. As I just mentioned, based on the current situation, we expect that the premium will be at least stable for the year. If there will be some higher impacts that at the end our competitors won't have access to the cipher, then it could increase. But that's also depending on the seasonality when you need the SOP. And if in this situation, then the cipher finally is not accessible.

And finally, are you worried about European potash demand? It kind of dovetails a bit of what Ben was asking earlier, but specifically there's gas price, CBAM. I know the season's been late for fertilizer in Europe. Should we be worried about it?

No. From Europe, we expect a normal demand.

Thank you. Yeah, thanks to you. Thanks for joining. Thank you, Sean.

Thank you for your question. And we're going to move to our next question. It comes from John. John, your line is open. Can you ensure that your device is unmuted and provide your research house?

everyone yeah it's john campbell with bank of america uh thanks for taking my questions i've got two please if i can um could you maybe elaborate on perhaps your potash sales mix by individual region say in 2025 so presumably brazil china europe maybe if you could lay out those percentages that would be helpful and also if you could maybe give any guidance kind of where you expect volumes to be settling in terms of the different regions in 2026 as well

Yeah, okay, pretty close. The half of oil volumes we are able to sell within Europe, so Euro-based. That's also very important for us. There we are independent from the US dollar FX rate. We have roundabout a million tons to Brazil and a little bit lower to Asia. So these are the main, main areas.

Very good. Any steer on 2026? Would you expect a stable share?

Yeah, it could be stable. There we have some volumes to China and to Brazil, but there we permanently optimize our regional mix to optimize the netbacks. So there we are able to shift, for example, to Brazil or to Asia, or maybe to keep some volumes in Europe, depending on the price levels. And that also depends finally on the logistic situation and the logistic cost. Because there we have a big advantage compared to our competitors that we have lower logistic costs compared to the others with our rules.

Okay, very clear. Thank you. Second question. Do you have any kind of sense or reading on the levels of inventory in some of the major markets? So I think in 2025, you know, Chinese inventories were a big topic. Presumably there's a lot of other bigger topics going on at the moment, but do you have any kind of updates in China and Brazil and India? Yeah.

Starting with India, the inventories are pretty low currently. Everybody is waiting for signing the contract with others. We are not at the table for the negotiations. With China, they are catching up a little bit with their port stocks to their strategic volumes, but what we still see is a good demand and keeping the price level at a pretty high level for the cross-border deliveries from russia to china so that reflects finally that there will be also a good demand and brazil is maybe a little bit lower but coming coming back to a normal level but in total there we see a strong demand uh especially in brazil okay very clear thank you thank you very much john for your question

And our next question comes from Oliver. Oliver, your line is open. You may proceed with your question. Can you ensure that your device is unmuted? And please cite your research house.

Yes, thank you very much for taking my questions. Research house, Svabo Research. My name is Oliver Schwarz and obviously I'm taking the questions one by one. First of all, I'd like to challenge you on your guidance, the upper end. You stated that in that guidance is baked in a slightly higher prices, both at the beginning of the year and also as a sustainable level. of those higher prices towards the end of the year. Given the situation in the Middle East, obviously, let's say, shipping rates are bound to go up, bunker oil is getting more expensive, shipping room is getting more scarce, transport routes are likely to expand to avoid the bottleneck we currently have at the border of Iran. You, other than your competitors, normally don't communicate prices ex-factory, but including freight and insurance. Hence, if the freight prices go up, obviously the prices go up as well, because that's just a past school item for you guys. But on the other hand, the price for your product, that you receive for the product isn't increasing despite the overall price increase. So what would you say we will need on top of the current prices that you see, for example, in Brazil, the 380, as a sustainable level for, let's say, the average of the current year to basically reflect the likely higher transport costs?

Yeah, finally, maybe important is that the higher logistical costs, the freight costs, based on the mentioned facts from your side, that also our competitors are affected by. That could increase the prices maybe furthermore. But what's very important, what we expect for the current year for the upper end, a moderately higher price, compared to the February level. So it's the spring season that we see a moderately higher prices and that will be reflected or spill over to other regions and other products. And this moderately higher prices will also last for the second half of the year. That's very important. Then we are able to reach the upper end. With the higher freight costs, I expect that that should be finally reflected because our competitors will be affected too. So that will be compensated, higher costs and maybe other price operations.

So in the outlook, we have basically based the outlook on the fact that we have normal shipping rates, then the prices need to go up moderately. If you have not normal shipping rates for the upper end, they would probably need to go up a few euros more. It's not much for the full year and for the ASP to be able to get that.

Excellent. Second question is in regards to your competitors from Israel. Obviously, the route to Europe for them is getting more attractive than the route towards the south. Hence, we likely to see more competition in the European market from those suppliers.

You are talking about ICL and the Arabian potash company from Jordan. They use the ports in Haifa, but also go through the Gulf of Aqaba and Suez channel. But at the end, the ships avoid to go to the east along Yemen, also before the Iranian situation. So I think that wouldn't change the situation. That's a competition like before.

Okay, thank you very much. Last question is on the... let's say the the impairment in summer and uh and the reversal uh now in q4 obviously that has uh very much to do with uh um argus prices um that or perhaps the prices you take into account uh for um for potash on the longer term basis just to get, let's say, a feeling for the sensitivity of your model that you use to calculate the value of your assets. Can you just give us a feeling what you change in your internal calculations to come up with, let's say, this chunk we saw now in Q4 that's uh basically um written back i mean we are talking about substantial numbers here so so what did basically trigger that uh that that uh that reversal yeah so uh we have different factors and uh we uh we uh

name them all in our annual report. So they did. And this time we had a change in the WEC. So it decreased from 8.7 to 8.2. And this has an effect of roughly 500 million. That was the right back we saw in the second half or in the fourth quarter. Thank you very much. No changes with regard to the potash assumptions. They stayed the same. No changes there.

Okay, understood. Thank you very much. Thanks to you. Thank you, Oliver.

And a gentle reminder to all, now we have the opportunity to ask additional questions. If you would like to ask any questions, feel free to press the hand raise icon located on your Teams app. We'll wait here shortly and pause here shortly to allow any other questions to generate. And, Tim, it appears as though we have no further questions at this point, so I'll hand over the call back to you for any final remarks.

Yeah, thanks to all of you for your questions, and I wish you a real great springtime and a good Easter, and see you soon.

Bye. Bye-bye. Bye.

Thank you, Tim. As a reminder, this call was recorded and the recording will be made available shortly after today's conference. Thank you all for your participation and have a great day.