K+S Aktiengesellschaft

Welcome to the KNS second quarter 2026 earnings call. 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 H1 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 2 of the posted presentation. And a note on data privacy. Please be aware that the team session will be recorded, webcast, and available as an audio replay on our homepage afterwards. People who ask a question in the should be clear that by switching on their camera and microphone, they agree to 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. Let's start with the quarter. Q2 EBITDA was significantly above the last year's Q2 at about 176 million euros. This was mainly due to the higher ASP, Higher volumes and cost discipline offsetting the pressure from price-related cost increases resulting from the geopolitical environment. In addition, please remember that we had part of the regular Bethune maintenance break in Q2 last year and will have it fully in the third quarter this year. Therefore, this did not wait on the second quarter this year as it did in 2025. Furthermore, Q2 last year was burdened by negative non-cash valuation effects on receivables related to the US dollar. In the industry plus segment, following the strong start into the year, performance continued to exceed expectations in the second quarter, even if seasonally on a lower level. Free cash flow. Free cash flow reached 40 million euros. It improved versus last year, but not in the same magnitude as EBITDA due to a higher tie-up in working capital, mainly receivables. Let's look at the full year guidance. We raised our 2026 EBITDA forecast to range from 680 to 760 million euros compared to 630 to 730 million euros before. This is mainly due to the strong performance in the second quarter. Midpoint is in line with VARA consensus that shows that the positive deviation in Q2 results is mainly due to a periodical shift between Q3 and Q2, caused among others by the described Bethune maintenance effect. The midpoint of the ABDA range assumes stable potash prices on average during H2, Current market price levels for logistical costs and a gas price of 45 US dollar per megawatt hour. We also raised our free cash flow guidance from at least break-even to mid to higher double-digit million euro amount, which is also in line with WARA consensus. After this brief introduction, I'm now looking forward to answering your questions with my colleagues Jens and Julia. And with this, I hand over to the operator to start the Q&A session.

Thank you, Christian. At this time, we will conduct the question and answer session. If you would like to ask a question, please press the raise hand icon at the top of your screen and provide your name and research house and proceed with your question. One more request, as usual, 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 will have the opportunity to ask further questions. This brings us to the first question of Christian. Christian, please state your name and your research house and proceed with your question.

Yes, thank you. Good morning, Christian, Jens Christian, Julia and team. Congrats on the results. I have two and a half questions. I'll ask the first one. First of all, how's the current demand in Brazil heading into the application season in your observation? What are your salespeople saying on the ground?

Hi Christian. In Brazil, we saw in the first half of the year record imports and good application. Currently, as we are in between the seasons, we see good inventories, but we expect for the second half of the year at least a normal demand in Brazil. And also what could have an impact is the challenge with phosphate. That could be that the application of potash as it is the most affordable nutrient compared to the others, it could change the NPK formula a little bit. So for Brazil, we are optimistic for the sector.

Okay, great. Now my hard question. And I admit it's far-fetched, but is there a risk that due to the extreme drought we've seen in Europe, some cultures such as corn might not have taken up the full amount of potash toppings given this year, and hence farmers might be incentivized to take a potash holiday in 27 in Europe?

No, that's currently not our expectation. Yes, we have a drought in Europe, but in different regions it's totally different. We just discussed it this morning. Even if you just go 50 kilometers to the north from Kassel, the corn is pretty good. In Kassel it's not as good, but we don't expect that it will have an impact on the application of potash in Germany.

And Christian, don't forget, potash is the nutrient that is responsible for water stress in plants. So it helps the plants to stand water stress. So the farmer who has not applied potash very well will see that the next field where the farmer has applied potash very well is better off. So maybe he has also then learned from that.

This year is clearly a stress test indeed. Now my final and third question. Can you elucidate a bit, indeed, talking about low water levels, how they affect production in your mines, particularly in Unterpreisbach? I'm aware that you might have at some point cooling water issues or not. Can you elucidate this a bit? Thanks.

Yes, as we see, low water levels in nearly every river in Germany. We also see this in the Ulster River, close to our Werra site. and we need cooling water for our production process. As long as we have the wet production process, we switch to a dry process with Avera 2016, so until 2028. The middle of 2028, we closely monitor for every time the levels and the rivers and yeah, that Thank you very much, Christian.

Our next question comes from the line of David. David, please state your name and research house and proceed with your question.

Hi, good morning. Yeah, thank you very much. It's David Simmons from BNP Paribas. Could I ask, it looked like de-icing was still above last year into Q2, which presumably is some inventory rebuild. First question, could you tell me where you think inventories are for de-icing into next season?

Yes, we have autos on a lower level because we are not in the de-icing season in Q2, but we still have a good demand and the inventories are pretty low, so we expect for the rest of the year with the refill orders and also if we have a normal winter, just a normal de-icing demand because there is no build-up of inventories on the other side.

Thanks. I was also wondering whether there might be a shortfall of inventories into next season, which would have to continue to be rebuilt at the end of this year. I don't know if you think that's the case.

I think most of the catch-up was done in Q2.

Q2.

Yeah. Okay.

Understood. Thank you. And then back on the Werra River situation, could you remind, obviously 2022 was a very different market in terms of price levels for potash. Is there any guidance you can give on if we saw a repeat of the 2022 shutdown? Firstly, could you remind whether that was saline water and cooling or if it was just cooling again? And secondly, is there anything you can say on the size of that impact at today's potash prices?

There was no shutdown in 2022. The last shutdown we had was in 2018, and that was fully related to salt water I think I'm mentioning 2022 because in your annual report you say if you see a repeat of the 2022 situation there could be a shutdown or some impact. Like I said, there was no, maybe we said if there would be a repeat of the 2018 situation, but to be honest, we have implemented so many measures after 2018 that basically we always said if there comes another dry season like that, we would not have an impact. Maybe that due to one allowance we were waiting for, I'm not sure, but the last shutdown related to it was 2018.

Understood. Okay. Thank you very much. You're welcome.

Thank you very much, David. Our next question comes from the line of Michael. Michael, please state your name and your research house and proceed with your question.

Hey, good morning, all. Michael Schiff here from AutoBHF. First question is on relative pricing, MOP versus specialty. So I'm rather looking for your net back plans and production plans into the second half. How do you see, how do you do the planning? So what's the kind of, is this rather MOP-centric or are you rather focusing on specialties? How should we think about the net back planning for the second half and the output?

As you know, we are permanently optimizing our netbacks with our production mix and what's very important that including in our rock soils as a verosite, they have included potash, sulfur and magnesium. and so we optimize our net back if we produce SOP on the one hand or if we produce MOP and Kieselrit. Kieselrit is a sulfur magnesium product on the other hand so we optimize if we get a higher net back in Kieselrit or an SOP for the sulfur especially due to the good price development in sulfur and so that's finally a week by week decision.

Okay, the second question is on your outlook statement at the midpoint, you are still baking in something like 45 euros per megawatt hour net gas price for the remaining 30% open exposure. So I wonder, I mean, currently we have 60 at spot, however, we are below 40 at one year forward. So I wonder how you see kind of gas price risk on your side or gas cost risk, let's say, heading into 27. So how your hedging looks like and how are you progressing here?

Very important is what you just mentioned, that we only have an open position of 30%, 70% are hedged. We only have a half year to go until the end of the year. Yes, we included 45 euro per megawatt hour for our midpoint. The volatility also addressed that we also expect for the second half of the year. But even if you calculate the 60, currently 60 euros for the rest of the year, that would have an impact of a one-digit million euro amount to our calculations. So we are very positioned with our guest hedge strategy.

And 27 hedging so far?

We have hedged 50% for Europe at a slightly lower price than this year and for Canada we were able to manage to hedge 88% at a very nice price level.

Okay, and my final short question. On your trading revenues, 46 million, rather elevated compared to historical levels, so just give us a bit of a background. Was there any kind of meaningful earnings contribution from that end, or was it just a pass-through?

The trading revenues, that was the technical MAP that we now have included in our portfolio. with a contract with Elixir and that was the main effect. Thank you.

Thank you very much, Michael. Thank you. Our next question comes from the line of Angelina. Angelina, please state your name and research house and proceed with your question.

Good morning, thank you for taking my questions. This is Angelina Gozova from Jade Morgan. I have three short questions this morning and my first one is just coming back to the guidance. So you were clear in outlining that the lower end of the guidance assumes some adverse impact from lower water levels. But what about the midpoint of the guidance? Is anything included? And for how long would the situation needs to last for the adverse impact to become sort of a base case rather than bare case?

In the midpoint, we included especially our normal maintenance that we have in Q3. And then you have a ramp-up phase after the maintenance period that we have just started on Monday at the Vera site. And for the lower end, yes, there we included that it could last for some weeks if we have low water levels, but we feel very comfortable based on the experience that we have with the lower end.

Okay, understood. Thank you. And my second question is about the demand backdrop in Europe. We have seen some increases in SOP pricing at the start of Q3, which were quite nice. And I'm wondering how this is being perceived by the buyers, and whether you think there could be more room for some further increases?

In Europe you should keep in mind that we had over the last months pretty high levels with good netbacks for us. So the room for additional increases isn't the same compared to the international oversea markets where we had lower price levels and a strong increase of the prices. So that's a little bit different overseas in Europe from the base where you are coming from. The cipher prices are in a good way and that's included in our assumptions.

Thank you very much. And my last question is, looking more broadly on the second half outlook, we have potentially an El Niño situation, which could be worse than what we saw in previous years. So I understand your guidance already implies a broad range of outcomes, and this is to an extent incorporated, but do you think There could be some surprise which is not foreseen by the guidance or drought, maybe potentially worse in the southern hemisphere. So how do you think about incorporating those impacts into your outlook?

Yes, we include the potential anemia effects in our outlook, but you should keep in mind that in different regions, there you have totally different impacts. There could be some drought in Southeast Asia and Australia. In Brazil, it could be more wet, but in other regions, more dry. And so in total, we don't expect that it will have a very meaningful impact overall. So as we look globally in all the regions with the different impacts.

Great, thank you very much.

You're welcome.

Thank you very much. Our next question comes from the line of Lisa. Your line is now open. Please state your name and research house. Proceed with your question.

Hi, this is Lisa from Rain Stanley. I have one follow up on El Niño. I mean, I know that for this year you don't expect an impact, but I mean, is there any sort of indication of if there were to be an impact in the second half of 2026 in specific regions in light of a very strong El Niño that I expected? I mean, what would change your view on the 2027 demand outlook? Just sort of any thoughts on that?

So if we have an extreme elenio with lower harvests, then we will have increasing agricultural commodity prices and that will compensate the situation from our side.

Okay, and then currently the potash supply demand outlook looks pretty tight, if not very balanced, but there are some incremental supplies coming into the market. I'm not so concerned about BHP because that could take a long time to ramp, but I was curious about your thoughts into 2027 on higher supplies potentially from Akron, who's ramping up a brand new potash mine, sort of any insights of how much volumes they may bring into the market and how that will affect the supply demand balance.

Yeah, and what's very important, Akron is not new for us, that was announced, that we expected, and that's also when we present our calculations, so what is coming to the market and what does catch up with additional increases, so a 2% step up each year, so that maybe won't have a big impact from our perspective. and as you address BHP BBC they announced they will come with the first volumes by the middle of 2027. What's very important they are not in the market it's a strong spring season in 2027 and even in 2028 there will be only a few volumes from their side and so the postponed start of the production is finally helpful for The balance of the market in the future due to the increasing demand that we see over the last years and also for the future.

Sure. And then my final question is on Industry Plus and de-icing. I mean, you had quite a strong second quarter with some restocking from the municipalities. Can you share any sort of dynamics on the pricing side? Should we also foresee higher pricing given sort of the restocking element that sits in there?

Yeah, so the industry plus segment overall including our salt business that we have in total good demand and good price developments and with the de-icing we expect for the rest of the year real normal winter and that's finally included.

Yeah, I think even with regard to the prices, they are on a historic high level. And so we think that this will stay at least for the next months. And so we will profit from it as we have probably in the past.

Okay, thank you very much.

Thank you.

Thank you very much. Our next question comes from the line of Sebastian. Sebastian, if you could please state your name and research house and proceed with your question.

Hello, good morning, everybody, and thank you for taking my questions. I'd have two, please. So, Sebastian Bremer, I should have said the name first. The first one is on open carbon exposure. There have been some changes recently to EU ETS, probably not huge in scope, but can you remind me Do you have any idea of what the under the current system 2030 K plus S has to purchase in terms of carbon credits a year?

Yeah, so we have already purchased certificates in the past and we're also profiting from the free allocation, but you can take as a rule of thumb 30 million per year is our cost for CO2 certificates. And now if there would be changes in the regulation, for instance, the reduction of the certificates will not be that strict as already planned, then there could be some tailwind from it.

That's helpful. Thank you. And I believe Angelina picked up on the question of SOP pricing more broadly, which has picked up a little in The most recent quarter, but is it possible for this business to get any better into 27? It seems to be really ticking along quite nicely. How do you think about the one year view on this, particularly the MOP prices start to decline?

Yeah, what's very important, the self-production that was missed over the last weeks or months, you're not able to refill it. So if there will be a normal cipher production, especially in the Middle East, then these are only the volumes that then are able to produce, but not more. So we have some backgrounds with the cipher and the cipher, we are trying to optimize the networks, as I just mentioned. If you are selling SOP or Kiesewitt, there's a good demand for this magnesium cypher products and we try to optimize our cypher netbacks in different products.

That's helpful. Thank you for taking the questions.

Yeah, you're welcome, Sebastian.

Thank you very much, Sebastian. And once again, ladies and gentlemen, to ask a question, that is the raise hand icon at the top of your screen to enter the queue. We will pause here briefly to allow any more questions to generate. We have a follow-up question from Christian. Christian, your line is now open. You may proceed.

Yes, thanks very much. Just a short one. Can you give us any guidance for the tax rate into the end of this year on a normalized basis?

So we will expect a normal tax rate of roughly 30%. All right. Thanks very much.

Thank you very much and once again ladies and gentlemen to ask a question that is the raise hand icon at the top of your screen to enter the queue. We will again pause here briefly to allow any final questions to generate. It appears there are currently no further questions. Handing it back to Christian for any final remarks.

Yeah, thanks to all of you for participating in this call and thanks also for your question. And we all wish you a great August with good weather and in autumn, some rain. Thanks to you and have a nice day.

This concludes today's server call. Thank you and have a great day.