From CapEx to Cash Capital Markets Day Merkers - November 12th, 2015

Transcription

1 K+S Aktiengesellschaft From CapEx to Cash Capital Markets Day Merkers - November 12th, 2015 Dr. Burkhard Lohr, CFO

2 From Capex to Cash Capex Phase Cash Phase 2020 Net debt: 2.2 billion 1) Leverage: 2.1x 1) CapEx: ~ 1.3bn billion 2) FCF: Negative 2) EBITDA: billion 2) Successful commissioning of Legacy Deleverage balance sheet Currency management Fit for the future Net debt: < 2.0 billion Leverage: x CapEx: Maintenance FCF: Positive EBITDA: ~ 1.6 billion 1) 9M ) Guidance

3 Legacy Project Status On Time and Budget 100% ~ 70% of CapEx spent 2014 and 2015 years of main construction and CapEx 100% Main parts awarded to suppliers 50% 50% Sustaining CapEx going forward 0% % August 2015 September 2015 October

4 ~90 WACC Legacy Project Status Legacy Valuation Implied Value Per Share ( ) Terminal growth rate 0% 2% 7% ~ 21 Bookvalue and lower end of DCF 8% ~ 11 Volume ramp-up (m metric tons)/ /costs per ton (CAD) Conservative price assumptions for Legacy based on MOP gran. Brazil Sustaining capex approximately CAD 100 million p.a. from ~1 ~2 ~2.1 ~2.3 ~2.4 ~2.6 ~2.9 Sales volumes (m metric tons) Production costs Logistics costs Mining taxes/ royalties 4

5 Balance sheet Well Financed for Current Situation RCF 1 billion (undrawn) Bond III 500 million (expn. Dec 2018; coupon: 3.125%) Bond II 500 million (expn. Dec 2021; coupon: 4.125%) Bond I 500 million (expn. June 2022; coupon: 3.000%) Financial instruments Group capex (in ) Peak years in terms of leverage Capex spent of > 1.0 billion per year from 2014 to 2016 driven by Legacy Project

6 Balance sheet Net Debt Outlook Leverage at 0.5 Leverage peak ~ 3 Leverage within target of Commissioning 2020 Legacy Net financial liabilities Provisions 6

7 Mining provisions Influence of Discount Rates on Provisions billion Provision increases by ~ 0.4 billion only due to change in discount rate ᴓ Discount rate 4.7% e ᴓ Discount rate 3.2% 7

8 Mining provisions Potential Cash Outflow from Mining Provisions Annual cash outflow assuming actual depletion schedules of mines 2015 ~ 20 million p.a ~ 30 million p.a ~ 40 million p.a ~ 40 million p.a. 8

9 Hedging Strategy Currency Hedging Even More Crucial in Future Gross exposure of ~ USD 1 billion in 2015 from Potash business Reduced by Legacy CapEx to be paid in USD Net exposure in 2015 ~ USD 750 million Legacy will approximatly double USD net exposure vs 2015 once on stream 9

10 Hedging Strategy Our Philosophy Principles Hedging against currency related deterioration towards the planned cash flow and earnings FX-derivatives are only used if an underlying transaction exists or is expected with great probability 1) Targets Limit risks of exchange rate fluctuations on income and cash flows Maintain chance to benefit from favorable market price changes Minimize premium payments 80% of the exposure shall be hedged 1) corresponds i. a. with the EMIR-regulation for risk mitigation 10

11 Hedging Strategy Hedging Example 2015 Hedging executed for 2015 in January to October 2014 Structure: Purchase of USD Put to limit downside Sale of USD Call to reduce hedging costs Plain vanilla options to fully benefit from USD strength Purchase of 1,36 1,45 1,40 1,35 worst case USD/EUR Purchase USD-Put-Option 1,30 1,25 Sale USD-Call-Option 1,20 best case 1,15 Sale 1,22 1,10 EUR/ USD on Jan 23, 1,36 EUR/ USD on Feb 20, 11

12 Hedging Strategy Hedging Rates 1,45 90% of exposure already hedged 1,35 Worst case 80% of exposure already hedged 1,25 Best case Worst case 60% of exposure already hedged 1,15 Best case Worst case 1,05 Best case 0, Continuous hedging already done until 2017 with very favorable exchange rates 12

13 Hedging Strategy : EUR/ USD Sensitivity EBIT impact 2016 vs 2015 ~ 80 million ~ 20 million ~ -25 million 1.00 Dollar strengthens Base Case Dollar weakens 13

14 Fit for the Future Project Setup Project Goals Improve cost and organizational structures to increase efficiency of production and SG&A functions Compensating for future cost increases Aspiration to save in the magnitude of 500 million between 2014 and 2016 compared with previous planning for this period Leverage peak ~ 3 ~ 500 million Savings due to Fit for the Future Achievements Target cost savings goals for 2014 exceeded Project led to an improved cost discipline within K+S In 2015 additional savings expected through increasing share of sustainable savings Net debt

15 Fit for the Future Cost Discipline Will Remain million Initiated measures unfolding full effect >150 >120 >120 >120 Original savings Additional savings beyond scope of Fit for the Future resolved 15

16 From Capex to Cash Capex Phase Operating and Free Cash Flow Cash Phase 2020 Net debt: 2.2 billion 1) million CAGR > 10% Net debt: < 2.0 billion Leverage: 2.1x 1) Leverage: x CapEx: ~ 1.3bn billion 2) FCF: Negative 2) EBITDA: billion 2) 2015e 2016e 2017e 2018e 2019e 2020e Operating Cash Flow Free Cash Flow (adjusted) CapEx: Maintenance FCF: Positive EBITDA: ~ 1.6 billion 1) 9M ) Guidance

17 From Capex to Cash Capex Phase Finance Strategy Cash Phase 2020 Net debt: 2.2 billion 1) Leverage: 2.1x 1) CapEx: ~ 1.3bn billion 2) FCF: Negative 2) EBITDA: billion 2) Goals: Secure financing ability of K+S Keep rating Capital Structure Target range M 2015 Net debt/ EBITDA 1.0 to Net debt/ Equity max. 100% 31% 42% 54% Equity ratio 40 to 50% 45% 45% 51% Net debt: < 2.0 billion Leverage: x CapEx: Maintenance FCF: Positive EBITDA: ~ 1.6 billion 1) 9M ) Guidance

18 How Will Our Investors Benefit from That? Maintain dividend policy Maintain rating Excess cash 40 50% of net profit Investment grade Funding further growth Share buybacks Special dividends 18

19 DEEP VALUE Q&A session 19