Speech by Dr. Ralf Bethke,

Transcription

1 Experience growth. K+S Aktiengesellschaft Annual General Meeting on Stadthalle, Kassel Speech by Dr. Ralf Bethke, Chairman of the Board of Executive Directors The spoken word is binding

2 - 2 - Welcome K+S Aktiengesellschaft Annual General Meeting 2005 Welcome! A warm welcome to you all, shareholders and shareholder representatives, Ladies and gentlemen, On behalf of the Board of Executive Directors and all employees I welcome you at the Annual General Meeting of 2005 of K+S Aktiengesellschaft. I also extend a warm welcome to our guests and to the representatives of the press. We are pleased that so many of you once again took up our invitation and have come to Kassel; this emphasizes your close connection with K+S and demonstrates the great interest you show in our work. We are sure that today s Annual General Meeting will once again prove informative and constructive. In my report today I first would like to describe the market environment in which we worked in 2004 and the internal measures with a long-term impact that we have put in place. We have been successful in strengthening our business segments through further acquisitions. This will also become apparent from our results and key figures for the financial year Furthermore, I will be reporting about the start of our new financial year, our prospects for 2005 and our medium-term goals.

3 - 3 - Slide : Attractive Growth in Our Markets 2004: Attractive Growth in Our Markets Above-average increase in worldwide potash demand again Marked rise in fertilizer prices (potash, fertiva) COMPO professional markets experience high growth European salt market is stable; Business in products for winter road clearance services prospering 1 Ladies and Gentlemen, First of all let us look at how our markets developed in The was again able to consolidate its leading position as a supplier of speciality and standard fertilizers as well as plant care and salt products in In the past year, there again was an above-average rise in demand of 10% to around 54 million tons of goods on the world potash market. Significant reason for this was the continuing high demand in Asia as well as in North and South America, whilst sales in Western Europe only rose marginally. In Eastern Europe, particularly in the 10 new member states which joined the EU in May 2004, demand is picking up although on a relatively low level. However, we view the growth trend in this region as positive. The progressively strong rise in global demand has also caused the prices of potash fertilizers to rise sharply on almost every market. Although almost all suppliers increased production output, potash globally remained in short supply, and prices reached a new all-time high; the sharp rise of sea freight costs also had an impact in this regard. Prices of nitrogen fertilizers also rose to a very high level due to high demand as well as the extreme increase in the price of the raw material ammonia; fertiva also benefited from this in terms of revenues but could not pass on all costs to the market. COMPO s professional business in 2004 was pleasing overall. Above-average volume growth was achieved in the Mediterranean region and in the new markets for COMPO products in South America. In addition, the market penetration for ENTEC,

4 - 4 - our brand for nitrogenstabilised speciality fertilizers, was further strengthened by a successful expansion of our assortment. Although an increasing number of imitation products have been appearing on the market, they have not been able to establish themselves thus far. In 2004, the COMPO consumer area was heavily influenced both by the wet season as well as purchasing restraint across all sectors, especially here in Germany. All in all, the West European salt market was in stable shape. There was an aboveaverage increase in business involving products for winter road clearance services due to the heavy snow and cold weather conditions at the very beginning and also at the end of Slide : Structures and Processes Successfully Optimised 2004: Structures and Processes Successfully Optimised Potash: Sylvinite extraction launched further implementation of the 10-Point-Programme greater flexibility on working hours/ more profit-related bonuses COMPO: optimisation/costs reduction projects put in operation fertiva: long-term partnership with BASF strengthened Salt: far-reaching rationalization in extraction of raw materials Logistics: greater emphasis on use of container transport Purchasing: greater use of online auctions 2 Targeted cost management is an ongoing task for us. We have therefore constantly worked once again on optimizing our structures and processes saw measures that were initiated for all business segments and some have already been implemented in part: This will serve to further enhance our earnings capacity in a sustainable manner. Key projects in the Potash and Magnesium Products business segment were: The successful launch of our extraction of the rich Sylvinite deposit in the Werra region in October From this year onwards, we expect a continuous improvement in earnings of around 20 million euros annually as a result of the higher capacity of 250,000 tons of goods per year combined with lower production costs.

5 - 5 - The further implementation of the 10-point-programme launched in 2003 also supported the improvement of earnings for the potash business area. In the meantime, we have successfully implemented the majority of measures relating to production and, in part, to administration. We have agreed greater working hours flexibility in the potash business area which is linked to realistic opportunities for achieving greater profit-related bonuses for employees: This represented an important step to strengthening our international competitiveness and to attain an adequate return again in the Potash and Magnesium Products business segment. We have also launched a series of projects in COMPO for optimization and to reduce costs which primarily target our consumer activities. The key factors are standardising packaging, more efficient marketing and, in part, greater working hours flexibility. In the case of fertiva, we signed a partnership agreement with BASF in June In it, both parties emphasized their intention of continuing the strategic partnership relating to fertilizers beyond the year The allocation of earnings between K+S and BASF has been revised with retroactive effect from 1 January 2004; fertiva now retains a larger part of the earnings without any change to its risk profile. In the Salt segment, we have achieved more progress on the rationalization of the extraction of raw materials in particular. Thus, at the Borth salt plant, we have introduced new underground technology that leads to higher performance, thus cutting costs; we have benefited from the rich experience of other plants in the K + S Verbund in this regard. In the logistics area, we have made greater use of more cost-effective shipment by container to offset the sharp increases in sea freight for bulk fertilizers, this primarily applies to the supplying of Asian markets saw around 36,000 containers dispatched for the, yielding considerable freight costs savings for us. The purchasing department of the, having been awarded several times, holds an excellent position in the procurement field across all sectors. In comparative terms, K+S is able to impress with its streamlined processes and innovative purchasing methods. Our electronically supported purchasing enables us to achieve considerable savings in comparison to traditional methods. The volume of procurement handled by means of on-line auctions, for example, now amounts to about 120 million euros annually.

6 - 6 - Slide : Course Set for Sustained Growth 2004: Course Set for Sustained Growth Leading position on the European salt market consolidated Potash business in France strengthened Long-term raw materials supply secured (esco, COMPO) Sales and logistics structure optimised, including - new organization of salt sales in Sweden - launch of the COMPO logistics platform in Spain 3 Ladies and Gentlemen, In 2004, we once again implemented important steps in setting the course for sustained growth of the, also by means of acquisitions. A milestone in this respect was the complete acquisition of esco from Solvay with retroactive effect from 1 January 2004; as a consequence, we have further expanded our leading position on the European salt market. By acquiring the fertilizer and granulation operations of French SCPA, also with retroactive effect from 1 January 2004, we have increased our presence in France. This opens up new growth opportunities for our potash business in Europe s most important agricultural market. Another focal point was the ensuring of our long-term supply of raw materials. esco successfully completed the construction of two caverns at the Dutch Harlingen site. COMPO strengthened its supply base for the attractive potting soil business by acquiring Meiners AG. The location has very good transport links, so that the new plant at Gnarrenburg near Bremen opens up new logistical advantages for COMPO to serve Central European markets. We have further optimized our distribution and logistics structures by means of two larger-scale projects: Since May 2004, the Salt business segment has been operating its own distribution organization in Sweden through esco Nordic, and this will provide active support for the winter service business in particular.

7 - 7 - COMPO has further improved the service it offers on the attractive Spanish market. At the end of 2004, COMPO put a new logistics platform for professional products near Valencia into operation. This means COMPO has moved closer to its Spanish clients and has also opened up further opportunities in the entire Mediterranean region. Slide : Highest Figures Achieved (German GAAP) 2004: Highest Figures Achieved (German GAAP) Change 100% esco 62% esco Revenues mill. 2, , % Earnings before interest and taxes mill % Net income mill % Net income per share % Gross cash flow mill % Capital expenditure mill % 4 Dear Shareholders, All this has contributed to the fact that in 2004 your achieved highs in terms of revenues and earnings. By the way, the Group financial statements for 2004 have been prepared in accordance with the German Commercial Code (HGB) for the last time. From 2005 onwards, the principles set forth in the International Financial Reporting Standards (IFRSs) will apply. I will look at this in detail later. Revenues for 2004 rose to almost 2.6 billion euros and exceeded the figure for the preceding year by about 13%. The increase is primarily attributable to price increases as well as the complete inclusion of esco following the acquisition of the remaining 38%. In addition, higher sales for almost all product groups helped to more than offset revenue decreases related to exchange rates. In Europe, we achieved revenues of just under 2 billion euros, which means that about 80% of total revenues was generated in this region, which is particularly important for us as an European producer. Here, in the case of the fertilizer business in particular, we are increasingly turning lower transportation costs to our advantage in relation to our competitors. In addition, revenues generated on overseas markets rose by 17% to around 600 million euros.

8 - 8 - At million euros, EBIT was up by more than 50 million euros or 44% on last year s figure. The greatest increase was achieved by the Potash and Magnesium Products business segment. In addition to the good course of business, the success deriving from the efficiency enhancement measures also made a contribution. With the exception of the COMPO business segment, which in the reporting period particularly suffered from high ammonia costs, all the other business segments posted earnings increases. The Salt business segment profited in particular from the takeover of the 38% stake in esco from Solvay. The s net income for the year rose, despite a higher tax expense, by just under 40% to million euros. In addition to the introduction of a minimum tax in 2004, the higher trade tax payments resulted in the doubling of the income taxes. Earnings per share on the basis of net income of the year amounted to 3.31 euros per share, up 89 euro cents or 37% year-on-year. This figure has been arrived at on the basis of an average 42.5 million no-par value shares. The clearly improved earnings position of the is also reflected in gross cash flow, which, at 269 million euros, is about 60 million euros higher than last year. We have therefore again been able to finance current capital expenditure and most expenditure on acquisitions by cash flow generated by operating activities. At 125 million euros and as planned, the volume of capital expenditure was slightly under the level for the previous year. Besides numerous smaller-scale measures, which were primarily related to maintenance and ensuring production, the focus was on the following projects that should provide support for our growth in particular: the development of the new potash deposit (Sylvinite Project) the expansion of the brine field at Frisia in the Salt business segment the completion of the new COMPO logistics platform in Spain.

9 - 9 - Slide : Attractive Returns Achieved (German GAAP) 2004: Attractive Returns Achieved (German GAAP) % 15.9% 17.3% 12.7% 7.2% 9.4% Return on capital employed (ROCE) Return on equity Return on total investment 5 The very good earnings position for the past financial year was also reflected in returns, all the figures reached an attractive level. There was a pleasing improvement in our particularly important return on capital employed (ROCE), a ratio that is followed closely internationally as well. At 15.9%, ROCE rose by more than 3 percentage points and was clearly above our cost of capital of a good 8%. In the case of the return on equity, as at 31 December 2004, we posted a strong increase to just under 23%; last year, this ratio had only been around 17%. The total return on total investment also increased significantly from 7.2% to 9.4%.

10 Slide 6 - Dividend for 2004 should be 30% Higher K+S Aktiengesellschaft Dividend for 2004 should be 30% Higher 55.3 Dividend payment ( million) * Dividend ( per share) * proposed 6 Due to the increase in earnings and the favourable outlook, the Board of Executive Directors and the Supervisory Board will propose, under item 2 of the agenda, raising the dividend for financial year 2004 by 30% to 1.30 euros per share. With 42.5 million shares entitled to dividend, this means that a good 55 million euros will be distributed. In terms of distribution levels, we are close to our goal of distributing about 40% of the Group s net income. The dividend yield is based on the closing price of the K+S share at the end of 2004, down 3.3% on the previous year: This is due to the very positive performance of our share. However, the yield still approximated that achieved by 10-year Bunds.

11 Slide 7 - K+S Share Gains Significantly K+S Aktiengesellschaft K+S Share Gains Significantly Performance of K+S share (Index: 30 Dec. = 100) Market capitalisation ( million) K+S 1,662 1, MDAX DAX source: Bloomberg Dec Dec May 7 The K+S share once gain significantly outperformed the DAX as well as the exceedingly good MDAX. An improved perception and assessment of the international raw materials and fertilizer industry by the capital market has encouraged this pleasing trend. By the end of December 2004, the K+S share reached euros, which, representing an increase of just short of 80% compared with the beginning of the year. The market capitalization of K+S has almost doubled to about 1.8 billion euros since the end of At 42.5 million, the number of shares has remained unchanged with the share capital of K+S Aktiengesellschaft still amounting to million euros. We have not acquired any of our own shares under the authorisation granted by the last Annual General Meeting. We also do not hold any shares of our own at the present time. As share repurchase programmes have demonstrated their value in the past, we request appropriate approval under item 7 of the agenda once again today. The decision to repurchase shares depends on how our liquidity evolves, conditions on the capital market as well as the realisation of our own acquisition and investment considerations and opportunities. Our shareholder structure is characterised by a high free float. At present, almost 90% of our shares are in free float. They are held mainly by German and foreign institutional investors and by some 35,000 private investors, including many K+S employees. The largest individual shareholder remains BASF AG, which holds just over 10% of the shares.

12 Slide 8 - The K+S Team A Guarantee of Success The K+S Team A Guarantee of Success 11,000 employees worldwide, highly competent and flexible Modern training and further training on an advanced level Efficiency enhancement by management of knowledge and ideas Strong bonds and identification with K+S Trusting dialogue with works council and the IG BCE trade union Strengthening our competitiveness on an international level 8 Ladies and Gentlemen, The K+S team guarantees our joint success. In 2004 as well, our management, employees working underground and above ground, experts in marketing, sales, purchasing, research and development and in many other demanding positions, they all contributed considerably to the s success with high personal commitment as well as competence and flexibility. Personally, as well as on behalf of my colleagues, and surely on your behalf I would like to express particular thanks for this outstanding performance. As at 31 December 2004, the employed a total of 11,000 persons worldwide. The increase of about 400 employees is due to the inclusion of all of esco and the acquisition of Meiners AG. In recent years, the number of employees who work for us outside Germany has increased. Our flexible and future-oriented personnel policy does justice to this development as well. We train around 600 young people in 22 modern occupations. With our continuing high training ratio of over 5%, we also discharge our particular social responsibility to the communities where our sites are located. We offer our employees wide-ranging further vocational training leading to professional qualifications. In addition to specialist and strategic measures, the spectrum also includes foreign language training courses reflecting the increasingly international dimension of K+S. Internal knowledge and ideas management is also a further important element for enhancing efficiency. In 2004, a total of 8,590 suggestions for improvements were submitted by our employees an increase of 66% on the previous year and the

13 resulting economic effect was around 4 million euros. This development is indicative of our open as well as dialogue-orientated corporate culture that we seek to attain for our Company. As a large team, which is characterized by strong bonds and identification with K+S, we have set ourselves clear goals and are acting together to achieve them. An important goal, in terms of personnel policy also, is to retain and strengthen our international competitiveness and thereby safeguard our operations and jobs over the long-term, here in Germany in particular. Our relationship with employee representatives and the industry union for mining, chemicals and energy (IG BCE) is very important for us. The dialogue based on confidence already led to future-oriented working hours and profit-related bonus models, whilst markedly contradictory positions still had to be overcome in other industry sectors. This also illustrates how we at K+S are committed to the Company, the employees and their jobs a small but good example of Germany s social market economy in practice. Slide 9 - Corporate Governance Corporate Governance A responsible and transparent corporate management is the basis of all decision-making and control processes at K+S The Supervisory Board set up an Audit Committee in March 2005 Additional work and responsibility of the Audit Committee should be included in the remuneration of the Supervisory Board members 9 Ladies and Gentlemen, Responsible and transparent corporate management is the basis of all decisionmaking and control processes. Together with the Supervisory Board, we again subjected our internal regulations and procedures to critical review in 2004 and concluded that K+S adheres to the principles of good, responsible corporate management. Naturally, we will continue to adhere to them in the future.

14 In March of this year, the Supervisory Board, in accordance with the recommendations of the Government Commission on the German Corporate Governance Code, set up an audit committee. The additional work and special responsibility assumed by this committee are to be reflected in the remuneration of the Supervisory Board members in the future. In this regard, too, we are following a recommendation contained in the German Corporate Governance Code. Under item 6 of the agenda, we would ask you to approve the necessary amending of the Articles of Association. Moreover, the Articles of Association should clearly set down the payment of an attendance allowance for Supervisory Board members and its committees. Slide 10 - Group Accounting in Accordance with IFRSs from 2005 Group Accounting in Accordance with IFRSs from 2005 IFRSs (International Financial Reporting Standards) obligatory from 1 Jan for all EU companies noted on the stock exchange Changeover from German GAAP to IFRSs at K+S: Operating earnings (EBIT I) in the IFRSs financial statements correspond more or less with the hitherto definition of EBIT under German GAAP Earnings after market value changes (EBIT II) - Derivatives for the US$-exchange rates hedges are valued at the relevant balance sheet date (therefore market fluctuations are possible) - Non-cash changes in market values are reported under the new Earnings after market value changes Net income burdened by non cash deferred taxes 10 Ladies and Gentlemen, Let us move on to the current financial year. We are entering a new world of financial reporting at the same time. From 1 January 2005, our accounting principles will no longer be based on the German HGB but on the principles set forth in International Financial Reporting Standards (IFRSs). It is obligatory for all companies noted on a stock exchange within the EU to apply these principles from this year onwards. It would certainly be helpful if I give you a brief outline of some of the key changes for the resulting from the changeover from Group accounting based on HGB to IFRSs, especially with regard to the reporting of earnings. As regards the computing of earnings, the earnings indicated by EBIT I correspond, more or less, with the hitherto definition of EBIT applied under HGB, as various factors, some of them conflicting, balance each other out with the changeover to IFRSs.

15 An important influence on the profit and loss account under IFRSs stems from how our financial instruments are treated in respect of the U.S. dollar hedging. With the hedging measures taken for the future and lasting until the first half of 2008, we are trying to counteract the negative currency-related effects of a possible decline in the value of the U.S. dollar. In accordance with IFRSs, these hedging instruments must now be reported at market value on our balance sheet. Subsequently, we are required, on each balance sheet date, from quarter to quarter, to include any change in respective market values in computing our earnings. In order to separate possibly marked fluctuations and non-cash effects from the operations level, we report such changes separately. This reporting takes the form of a new earnings level earnings after changes in market value, i.e. EBIT II. Foreign currency gains achieved as a result of exchange rate hedging will continue to be reported for the relevant period in the operating earnings or in EBIT I. We are of the opinion, that the operating earnings (EBIT I) provides a better indication of the operating earnings capacity of the than the earnings after market value changes (EBIT II). A further change, one particularly tangible for us, relates to tax expenses. Under IFRSs, these will at first be higher, as in addition to income taxes payable non-cash deferred taxes must also be accounted for. These arise for us primarily from the use of loss carryforwards. Until this item is fully used up, it will result in a significant but non-cash charge on our net income for the year under IFRSs. Slide 11 - A Good Start in the First Quarter of 2005 (IFRSs) A Good Start in the First Quarter of 2005 (IFRSs) million Q Q % +24% % Revenues 0 Operating earnings (EBIT I) 0 Earnings after taxes 11

16 Ladies and Gentlemen, Let us now move on to the current business results for the first quarter of 2005, prepared, as I already stated, under IFRSs for the first time, with the comparative figures for 2004 also adjusted to IFRSs. As you can see, we have had a good start again, I believe. At million euros, first quarter revenues exceeded the figure for the same period last year by about 42 million euros or 6 %. Given the sharp rise in world market prices for potash on a year-on-year basis, the strongest gains were posted by the Potash and Magnesium Products business segment. The cold and snowy weather conditions lasting up to March resulted, on the one hand, in very satisfying business for de-icing salt, but, on the other hand, delayed the start of the spring fertilizer season. This resulted in temporary shifts in volume for potash and nitrogen fertilizers as well as the COMPO consumer business. We achieved a clear increase in earnings (EBIT I) for the first quarter of 2005, a marked increase of about 24% or just short of 20 million euros to million euros. With the exception of the Waste Management and Recycling as well as the Services and Trading business segments, all business segments were able to post gains. In this respect, too, the greatest increase was achieved by the Potash and Magnesium Products business segment: Despite the first quarter shift in sales resulting from weather conditions, we are profiting from the sharp increase in world market prices for potash fertilizers on a year-on-year basis. In addition, the successes deriving from our efficiency enhancement programmes also boosted the favourable trend in earnings. As you know, we already generate a considerable portion of our earnings in the first half of the year, and therefore it would be misleading to project these figures over the entire year. Nevertheless, this trend is meaningful and promising, especially for the current second quarter, which we can already provide a good estimate for. In the first quarter of 2005, earnings after taxes more than doubled at 91.3 million euros. The higher operating earnings as well as the sharp rise in the market values of our double barrier options for hedging the U.S. dollar since the beginning of the year more than made up for the higher income taxes. Of total income taxes of 52.7 million euros, 34.0 million euros is deferred tax and non-cash therefore. Ladies and Gentlemen, I would now like to move on to the prospects for 2005 as a whole in the individual business segments:

17 Slide 12 - Potash and Magnesium Products: Prospects for 2005 Potash and Magnesium Products: Prospects for 2005 A high, further growing demand for potash worldwide Clear improvement of margins by increase of prices and cost savings Adoption of further efficiency enhancements measures Constructive review of the anti-dumping regulations by the EU Commission Higher revenues and sharp increase of operating earnings expected 12 For 2005 as a whole and onwards, we expect a constant high and growing demand for potash worldwide. All the major potash producers have therefore announced that they will expand production capacity in response to needs. However, as such expansion is limited, we do not expect any significant excess in supply for the time being. Since the beginning of the year, an additional 250,000 tons per year has been available to K+S. In Europe and overseas, the year 2005 began with significantly higher potash prices than at the beginning of This is particularly true of CIF prices with a high freight component. For the first half of 2005, we have already been able to achieve significant price increases in the fertilizer business and for industrial potash products. For 2005 as a whole, we expect revenues to be significantly higher than in 2004 as a result of price and volume-related factors. Despite higher energy and freight costs, operating earnings should rise progressively because of higher revenues, as long as the U.S. dollar exchange rate requires no significant follow-up hedging. The effect of the further implementation of our efficiencyenhancement measures and the growing cost savings resulting from flexible working hours should boost earnings growth. Ladies and gentlemen, Many of you are aware of the fact that EU anti-dumping regulations have for a long time provided effective protection against unfair competition on the part of Russian and Belarussian potash producers. The European association of potash producers (APEP) has applied for the implementation of new appropriate, effective measure before the current regulations expire this month. The procedure at the EU Commission has been initiated in the meantime and will be completed in August 2006 at the latest as a result of a review process that might last several months.

18 Until the EU bodies reach a decision, the present system of protection will remain in force. We assume that the review process will basically result in a fair competitive environment being assured for the European potash industry and thus for us in the future, too. Slide 13 - COMPO: Prospects for 2005 COMPO: Prospects for 2005 Delayed start to the season due to winter weather conditions in the consumer and professional business Positive trends in products for home and garden Efficiency enhancements Ammonia prices somewhat more favourable Slight increase in revenues and improved operating earnings 13 The COMPO business segment has experience a late start to the speciality fertilizer season over the course of the first quarter of 2005 as a result of the longlasting winter conditions in large parts of Europe. This initially affected demand for both the consumer and the professional businesses. The mild temperatures experienced from mid March then led to a sudden rise in demand in the consumer area. The favourable trend in the gardening sector should continue over the course of the year. The consumer business was excellent in April. In terms of the professional business, we must however assume that late start in the first quarter of 2005 will have a knock-on effect and that it will not be possible to completely make up for this over the course of the rest of the year. All in all, we expect the COMPO business segment to achieve a slight increase in revenues for Assuming that the price of ammonia will be lower than in 2004, operating earnings should display a further increase year-on-year. The efficiency enhancement measures that have already been instituted should also have an impact in this regard.

19 Slide 14 - fertiva: Prospects for 2005 fertiva: Prospects for 2005 Consumption of nitrogen fertilizers in Europe on the same level as the previous years Gratifying development of overseas business Continued positive price situation Slight increase in revenues and operating earnings 14 The fertiva business with nitrogenous fertilizers was largely satisfying at the beginning of the year. In Europe, demand is still relatively modest thus far. Due to considerable stocking up, distributors were still sufficiently stocked with products; in addition, the late start to the fertilizer season as a result of weather conditions also negatively impacted on demand. In the meantime, the application of agricultural fertilizers in Europe is in full swing, so that we expect nitrogen fertilizer consumption for the year as a whole to approximate last year s level. Overseas, there are indications that we will achieve pleasing increases, especially in our key markets in Latin America and in Asia. Following the strong price increases for nitrogen fertilizers achieved last year, the revenues being currently generated in Europe and overseas are on a somewhat higher level at present. Thus, fertiva should attain a slight increase in revenues and operating earnings in relation to last year for 2005 as a whole.

20 Slide 15 - Salt: Prospects for 2005 Salt: Prospects for 2005 A very good start with winter road clearance products Further consolidation on the European salt market expected Rationalization underground takes effect Last year s excellent level for revenues and operating earnings achievable 15 With the prolonged winter weather conditions in Europe, our Salt business segment had a very good start with products for winter road clearance services, creating the basis for another good business year in The generally high intensity of competition on the Western European salt market will probably persist and result in further consolidation, which is already becoming apparent. esco will be able to maintain its leading position in Europe with its product range, which meets market requirements. The rationalization measures we have introduced underground will have an increasing effect and make a contribution in this regard. Revenues and operating earnings for the whole of 2005 will depend on such factors as how far the stocks of de-icing salt and the winter business at the end of the year will be in line with last year s high level. Given the very good start to the year, it would appear possible to attain last year s levels from today s perspective.

21 Slide 16 - Complementary Business Segments: Prospects for 2005 Complementary Business Segments: Prospects for 2005 Waste Management and Recycling Waste disposal normalized as expected Increase in flue gas cleaning residues Revenues and operating earnings slightly lower Services and Trading Revenues and operating earnings expected to attain the good levels of the previous year 16 Ladies and Gentlemen, I would no like to move on to the two business segments that provide a high degree of support for our market-related activities and additionally strengthen the portfolio. In 2004, our Waste Management and Recycling business segment benefited from two special waste disposal projects in particular. These will not be repeated this year, so that in 2005 we expect normal, lower volume for waste storage. By methodically intensifying our work on markets elsewhere in Europe, we will able to partially offset this decline. Starting June 2005, it will no longer be possible for untreated residential waste to be stored at waste disposal sites located above ground in Germany. This should result in an increase in flue gas cleaning residues from domestic waste incineration plants, which are generally re-utilised underground. We will profit from this legal requirement; today, we already are the leading provider in this waste disposal segment. This positive development will not, however, be able to fully make up for the decline in the waste storage business in full. For 2005 as a whole, we thus expect somewhat lower revenues as well as a limited decline in operating earnings. We expect the course of business in the Services and Trading business segment to remain stable in 2005 again. Both revenues and operating earnings for 2005 should attain the good levels of the preceding year.

22 Slide 17 - Group: Prospects for 2005 Group: Prospects for German GAAP 2005 IFRSs Revenues Operating earnings million million 2, Revenues are expected to increase further We anticipate a strong improvement in operating earnings (EBIT I) 17 Ladies and Gentlemen, What do we expect for the as a whole over the course of the rest of 2005? Revenues for 2005 should increase again. As a result of the favourable demand and price trends in almost all of our markets that I have indicated, we are confident that we will succeed in continuing to achieve growth as long as there is no significant deterioration in the global economic environment. In terms of operating earnings (EBIT I), we even expect a substantial improvement year-on-year if no significant follow-up hedging will be required for our U.S. dollar hedging transactions. We have hedged the U.S. dollar favourably until now and we will only have to partially adjust our hedging measures from a dollar exchange rate of about USD 1.40 per euro. The impact on earnings deriving from Sylvinite production, the full implementation of more flexible working hours in the Potash and Magnesium Products business segment and the measure to enhance efficiency initiated in COMPO should serve to further increase earnings from a market angle.

23 Slide 18 - Our Medium-Term Goals Our Medium-Term Goals Further strengthening of competitiveness on an international level! Fostering customer relations Innovative products Acquisitions / Cooperations Further optimisation of production processes Active management of knowledge Clear opportunities for healthy growth and attractive earnings! 18 Ladies and Gentlemen, We have also set ourselves demanding goals for the medium term. A priority is to maintain and to continue strengthening our international competitiveness in all areas. To achieve this, we are, concentrating on customer care and innovations in our production range. A good example is our innovative ENTEC product line in the COMPO business segment: We continue to expand it consistently and to transfer it to other applications and markets in different ways. We consider various tangible options for acquisitions and cooperations in our current business areas. In doing so, we will not lose sight of one of our fundamental goals, which is a feature of our business concept: the realisation of more synergies for the both on our markets and internally in order to constantly achieve improvements with regard to costs. Our financial strength offers us various opportunities for action with regard to acquisition considerations and we will make prudent use of it. We will keep our costs under control by means of continued improvements in production processes and structures. The greater participation of our employees in developing our cash flow figures, in times that are good and those that are not as good, also increases our flexibility to adapt in order to shape the earnings capacity of the favourably over the long-term. And finally, by means of active knowledge management, we will further increase our ability to react in our markets as well as our productivity.

24 All these elements should contribute to making the even stronger. We see concrete opportunities for continued healthy growth and attractive earnings, achieved against the background of a company policy that is transparent and consistently based on the principles of the social market economy. My personal thanks go to all shareholders. I also wish to thank you on behalf of my colleagues on the Board of Executive Directors for the trust that you have displayed in us and all the employees of the. Rest assured that we are all facing our challenges with undiminished commitment and will do our utmost to attain our goals for achieving the lasting and growing success of your. Thank you very much.