K+S Aktiengesellschaft Commerzbank Sector Conference 2017 Frankfurt, 29 August 2017 Lutz Grüten, Head of Investor Relations Martin Heistermann, Senior Investor Relations Manager
Content A 1 2 B C K+S Unique Strategic Position Potash and Magnesium Products Salt Current Trading Outlook K+S Group 2
Investment Case K+S Group Potash and Magnesium Products Business Unit Salt Business Unit Complementary Activities Broad product portfolio Geographic reach Positioned for growth K+S Group 3
Our Products Potash and Magnesium Products Salt Industrial products 12% 7% 8% Food processing 15% Consumer Specialties 39% 18% Salt for chemical use Industrial KCl (MOP) 49% 52% De-icing in % sales volumes, FY 2016 K+S Group 4
Content A 1 2 B C K+S Unique Strategic Position Potash and Magnesium Products Salt Current Trading Outlook K+S Group 5
Potash and Magnesium Products Long-Term Dynamics Positive for Fertilizer Potash is indispensable for plant growth Less arable land but more protein consumption per captia Jahr 1960 2010 2050 Global population development 3.0 billion 6.9 billion 9.7 billion Arable Land per capita 4.300 m 2 2.100 m 2 1.800 m 2 Protein per capita 60 g/ day 80 g/ day 130 g/ day 1 The growth and yield of plants are limited by the nutrient which is in shortest supply Justus von Liebig, 'The Natural Laws of Husbandry', 1863 Sources: UN, World Population Prospects, 2012 Revision, UNDP, 2013; FAOStat 2014 FAO 2014 - forecasts based on the expected increase in animal protein K+S Group 6
Potash and Magnesium Products Utilizing Entire Range of Minerals in Complex Deposits Mineral extraction K+S product portfolio SOP Fertilizer Health Care & Nutrition Industrial Applications Raw Salt Residue 63.5% Kieserite 20.4% Kieserite Korn-Kali Magnesia-Kainit KCL (MOP) 3.0 6.1 Industrial products 0.7 Specialties 2.4 Health Care & Nutrition Industrial potash Kieserite Korn-Kali KCl 16.1% MOP SOP e.g. Neuhof 2014 Basis: 2016 Sales volumes in million tons Reducing specific costs of our MOP products $$$ Extending our product portfolio K+S Group 7
Potash and Magnesium Products Our Unique Portfolio Makes Us More Robust MOP gran. Europe vs. Brazil (Source: FMB) US$/t 600 500 400 300 200 Europe (, Granular, cfr) Brazil (US$/t, Granular, cfr) 2012 2013 2014 2015 2016 2017 /t 600 500 400 300 200 K+S average selling price versus selected peers K+S Basis: Q1 2012 Peers Basis: Q1 2014 Peers K+S Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2014 Q1 2015 Q1 2016 Q1 2017 K+S Group 8
Potash and Magnesium Products Environmental Roadmap 2017/2018 Deep-well injection permit (Werra) granted until 2021 Volume 1.5 million m³ p.a. including numerous ancillary provisions Situations of low water levels remain challenging especially in 2017 Continuous implementation of measures to limit production standstills Commissioning of KCF 1 to reduce saline wastewater from Werra plant by 1.5 million m³ to 5.5 million m³ expected to have a positive impact on disposal situation Expansion of tailings pile capacity Hattorf (Werra) remains challenging, but is also well on time 1 Kainite Crystallization and Flotation Facility 2019 and beyond Expansion of tailings pile capacity at Wintershall (Werra) and Zielitz Extention of Werra river injection permit Evaluation and Implementation of sustainable environmental solutions Oberweserpipeline Underground storage (currently being analyzed) Coverage of tailings piles K+S Group 9
Potash and Magnesium Products First Potash Produced at Bethune First potash produced earlier than expected Infrastructure in place Trains Harbor Capacity of 2 million tons p.a. by the end of 2017 ramping up to 2.86 million tons p.a. by 2023 Positive EBITDA in 2018 "With Bethune, the most modern potash facility in the world, we are pushing into a new dimension. We are now producing potash on two continents, said Dr. Burkhard Lohr (CEO of K+S). K+S Group 10
Bethune Mine (Legacy Project) Strengthening our Global Presence China India South East Asia North America Expanding our current production portfolio in Germany with a North American production site Second source supplier Securing a good asset base with competitive production costs Sales and distribution through existing distribution structures of the K+S group Exclusive outline agreement with Koch Fertilizer about supply and sales of Potash fertilizers in the US Regional growth projects in China and SEA Flexible multi-product strategy South America K+S Group 11
Potash and Magnesium Products Strengthening of Specialties Portfolio Huludao Acquisition of China based Huludao Magpower Fertilizers Co., one of the largest producers of synthetic magnesium sulphate (SMS) SMS is used as fertilizer for oil palms, soybeans and sugar cane as well as for industrial applications The acquisition is expected to Strengthen our competitive position in specialties Improve access to growth markets of South-East Asia and China Scalable low cost production assets Capacity of ~90 kt expected to double in foreseeable future Expansion of water-soluble products to participate in fast growing fertigation markets 30% stake in Al-Biariq for Fertilizer Plant Co., Ltd. (Saudi Arabia) Option to acquire further 30% within 2 years Capacity of ~20 kt water soluble SOP p.a. - intention to double in near future Participation in growth in Middle East, Africa and South Asia Market for potash containing fertigation products used in irrigating systems expected to grow strongly Globally min. 5% p.a. Fast growing regions (e.g. India) + 25% p.a. Source: K+S-estimation/CRU 2012 K+S Group 12
Content A 1 2 B C K+S Unique Strategic Position Potash and Magnesium Products Salt Current Trading Outlook K+S Group 13
Salt Long-Term Dynamics in Salt Demand Demand driven by Product category Winter weather conditions De-Icing Infrastructure development Consumer Increasing standard of living Population growth Food processing Economic growth and industrialisation Industrial Urbanization Chemical Low single-digit demand growth p.a. to 2018 1 1 Source: Roskill K+S Group 14
Salt Inevitable for life De-Icing Consumer Food processing Industrial Chemical Main Applications: Winter road maintenance services Commercial users Private households Main Applications: Table salt Dishwasher care Water softening Pool chlorination Body care Main Applications: Food processing industry Baking industry Condiment and preservative agent Main Applications: Water treatment Drilling fluids Animal feed Infusion, dialysis solutions Pharmaceuticals Preserving of fish Dyeing works Leather treatment Main Applications: Chemical industry Chlor-Alkali processes ( PVC) Polycarbonates, MDI (Isocyanat) ( plastics, synthetic resin) Synthetic Soda Ash ( glass) K+S Group 15
Salt Unrivalled Global Production Network Potential Expansion into Asia-Pacific Competitive edge: Unrivalled global production network More than 30 assets on 3 continents allow close proximity to customers in a business that is highly freight-cost sensitive Ensuring close proximity to customers Broad range of products due to variety of production methods Best in class supply chain assets and competence Industry best cost production in Chile K+S Group 16
Salt Diverse Regional and Product Portfolio Salt for chemical use Normalized Revenue Distribution Food processing Industrial Consumer 1 De-icing adjusted to normal winter K+S Group 17
Salt Presence in Attractive De-Icing Markets Eastern Canada Scandinavia Great Lakes US East Coast Central Europe Indicative regional strength of winter 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 Europe North America K+S Group 18
Content A 1 2 B C K+S Unique Strategic Position Potash and Magnesium Products Salt Current Trading Outlook K+S Group 19
Recalculation of D&A (I) With the start of Bethune, K+S has harmonized useful lives of similar assets globally and across business units Effects on EBIT I 2017 K+S Group t/o Potash and Magnesium (excl. Bethune) t/o Salt Δ ~40m Δ ~30m Δ ~10m Dividend policy remains unchanged for the time being: Payout ratio (40-50% of adjusted net profit) K+S Group 20
Recalculation of D&A (II) Asset lifetime (Peer Group Analysis) years K+S (old) K+S (new) PCS AGU MOS CMP Buildings 14-33 1 3 14-33 1 3 9-60 2-60 40 10-30 Raw material deposits 17-250 17-250 20-99 Gallery and excavation work 4-122 4-122 Technical equipment and machinery 4-25 8-39 3-60 1-60 25 3-50 Ships 25 25 Other equipment, operating and office equipment 3-10 7-11 2-12 1-45 3-10 First Adjustment for more than 10 years Compared to peers still pretty cautious lifetime assumptions K+S Group 21
P&L million FY/15 Q1/16 Q2/16 Q3/16 Q4/16 FY/16 Q1/17 Q2/17 Revenues 4,175 1,096 732 688 941 3,457 1,126 742 EBIT I 782 218 15-31 28 782 137 29 Margin 19% 20% 2% -5% 3% 7% 12% 4% Financial result -34-13 -15-9 -15-52 -9-4 EBT, adjusted 748 205 0-41 13 177 129 25 Tax rate, adjusted 28% 28% 29% 34% 23% 26% 27% 24% Net income, adjusted 542 148 0-27 10 131 95 19 EPS, adjusted 2.83 0.77 0.00-0.14 0.05 0.68 0.49 0.10 Q2/17 EBIT I in line with consensus expectations Higher product availability at the integrated Werra plant This was offset by lower volumes of de-icing salt in North America and higher start-up costs compared to the previous year at the new plant in Canada The adjusted key figures only include operating forecast hedges of the respective reporting period in EBIT I. In addition, related effects on deferred and cash taxes are also excluded. K+S Group 22
Cash Flow and Balance Sheet million FY/15 Q1/16 H1/16 9M/16 FY/16 Q1/17 H1/17 Operating cash flow 669 294 359 390 445 267 384 - Investing cash flow (pre sale/ purchase of securities) -1,305-243 -537-847 -1,222-212 -410 Adjusted free cash flow -636 50-178 -456-777 55-26 CapEx 1,279 280 643 904 1,171 277 410 Net debt (-) -2,400-2,367-2,860-3,180-3,584-3,614-3,745 t/o Net financial debt (-) -1,364-1,315-1,761-2,052-2,401-2,440-2,592 Net debt/ EBITDA (LTM) 2.3 2.5 3.6 4.9 6.9 8.1 8.1 Equity ratio 52% 52% 49% 48% 47% 48% 45% Operating cash flow moderately above last year s level CapEx in line with expectations K+S Group 23
Potash and Magnesium Products million FY/15 Q1/16 Q2/16 Q3/16 Q4/16 FY/16 Q1/17 Q2/17 Revenues 2,091 461 371 302 399 1,532 474 387 EBIT I 546 102 15-49 -35 34 42 31 Margin 26% 22% 4% -16% -9% 2% 9% 8% t/o Legacy OpEx -68-19 -21-26 -27-93 -25-25 Avg. selling price ( /t) 307 272 250 239 246 253 260 252 Sales volumes (million tons) 6.82 1.69 1.48 1.26 1.62 6.06 1.82 1.54 Costs per ton 1, 2 217 201 226 258 251 232 223 215 ASP up Year-over-Year, but slightly down Quarter-over-Quarter, due to: Regional mix Korn-Kali and Industrial Potash prices lagging behind MOP SOP demand and pricing remains sound 1 (Revenues EBIT) / Sales volumes 2 Excluding OpEx Legacy 3 Excl. anticipated insurance payment K+S Group 24
Salt million FY/15 Q1/16 Q2/16 Q3/16 Q4/16 FY/16 Q1/17 Q2/17 Revenues 1,925 595 319 346 502 1,762 611 316 EBIT I 266 123 5 18 58 204 106 0 Margin 14% 21% 2% 5% 12% 12% 17% 0 Sales volumes (million tons) 21.1 7.1 2.9 3.5 5.8 19.4 7.5 2.8 De-icing 11.9 4.9 0.6 1.0 3.5 10.1 5.1 0.6 Non de-icing 9.2 2.2 2.3 2.5 2.3 9.3 2.4 2.3 Average selling prices ( ) De-icing 65 64 53 52 59 60 61 54 Non de-icing 120 122 123 113 124 120 120 122 Q2/17 non de-icing revenues stable Year-over-Year Another weak de-icing quarter after mild winter in the US partly offset by better demand in Europe K+S Group 25
Debt Profile 3.000 2.500 2.000 1.500 1.000 500 Debt Instruments Bond IV 500 million (mat. 2018; coupon 3.125%) Schuldschein 325 million (mat. 2019) Schuldschein 335 million (mat. 2021) Bond III 500 million (mat. 2021; coupon 4.125%) Bond II 500 million (mat. 2022; coupon 3.000%) Bond I 625 million (mat. 2023, coupon 2.625%) Schuldschein 40 million (mat. 2023) 0 2017 2018 2019 2020 2021 2022 2023 As further liquidity source a syndicated credit line facility amounting to 1 billion is in place until 2020 K+S Group 26
Dividend Policy 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Target payout ratio of 40-50% 2012 2013 2014 2015 2016 Payout ratio (lhs) Dividend yield (rhs) 1 10% 8% 6% 4% 2% 0% Earnings-based dividend policy Payout ratio of 40 50% of adjusted net profit Dividend for 2016: 0.30 per share 1 Based on year-end share prices K+S Group 27
Currency Management 2017 1,30 1.30 1,25 1.25 Limitation of risk EUR/USD 1,20 1.20 1,15 1.15 1,10 1.10 1,05 1.05 Actual EUR/USD exchange rate Planned EUR/USD rate Worst Case Best Case 1,00 1.00 0,95 0.95 Limitation of chance 0,90 0.90 Q1 Q2 Q3 Q4 Anticipated average exchange rate (full year): 1.12 EUR/USD (incl. premium) Premise: based on planned rate of 1.15 EUR/USD for the second half of the year Hedging of transaction risks, basis USD budget net position Cash Flow view: most of anticipated net position hedged Hedging is used if an underlying transaction exists or is expected with great probability K+S Group 28
Content A 1 2 B C K+S Unique Strategic Position Potash and Magnesium Products Salt Current Trading Outlook K+S Group 29
Cost Discipline Will Remain High million 30 >150 >180 >250 Fit for the Future successfully completed Lasting contribution towards improving cost and organizational structures Measures implemented will continue beyond 2016 with full effects by 2018 2013 2014 2015 2016 Additional top-down measures beyond Fit for the Future initiated Results in 2017 and 2018 Details on our strategy project Shaping 2030 to be announced in autumn 2017 K+S Group 30
Guidance: EBIT I million 229 Main effects: + Potash volumes/ product mix + De-icing volumes Effect: - ~40m Main effects: + First sales from Bethune - D&A after production start offsetting profits from first potash sales Main effects: ± Potash prices Salt de-icing prices Main effects: + Cost savings + FX - Wage agreement - Freight / Energy 260-360 1) 2017 is still a transitional year, but beyond: New group strategy Bethune EBITDA positive Salt business continues to grow Commissioning KCF 2) and pile expansions Significantly lower CapEx Group free cash flow positive De-leveraging to begin EBITDA Actual 2016 Volume/ product mix Adj. D&A Bethune Price Other effects (net) 2017e 2018e 2019e 2020e 1) Based on average weather conditions for the rest of 2017. Dry periods could have a severe impact on earnings of the Potash and Magnesium products business unit 2) Kainite Crystallization and Flotation Facility K+S Group 31
Guidance: Underlying assumptions FY 2016 Prev. guidance FY 2017e Potash and Magnesium Products Global sales volumes 1) ~ 66m tons slight increase slight increase K+S sales volumes 6.1m tons significant increase 6.8-7.2m tons Average selling price (per ton) 253 slight increase slight increase Salt K+S sales volumes 19m tons moderate increase moderate increase t/o de-icing 10m tons moderate increase moderate increase Group Revenues 3.5bn tangible increase 3.60bn 3.80bn EBITDA 519m tangible increase 560m 660m EBIT I 229m tangible increase 260m 360m Financial result -52m significant improvement significant improvement CapEx 1.2bn significantly lower significantly lower Average fx-rate (EUR/USD) 1.11 1.09 1.12 1) Incl. 4mt of potassium sulphate and potash grades with lower mineral content K+S Group 32
Housekeeping items Additional information on Outlook FY 2017 1) Tax rate: ~26-28% Financial result: ~-70 to -80 million EUR CapEx: ~900 million EUR D&A (after new method): ~300 million EUR Reconciliation (EBIT I): ~-40 to -50 million EUR Production outages: ~55 days (based on normal rainfalls) FY 2017 Guidance mainly determined by: Ramp-up at Bethune Rainfalls in H2 (days of outages) Winter conditions in Q4 FX, and potash price development 1) At USD/EUR 1.12 K+S Group 33
Strategic Review Two well-defined strategies for our business units in place: Salt 2020 and our Shaping the Future for Potash & Magnesium products Identifying future growth potential Considering important trends for our businesses: Growing population Rising economies Digitalization / Precision Farming We aim to release details on our Shaping 2030 strategy in autumn 2017 K+S Group 34
IR Contact Details K+S Aktiengesellschaft Bertha-von-Suttner-Str. 7 34131 Kassel (Germany) E-mail: Homepage: IR-website: investor-relations@k-plus-s.com www.k-plus-s.com www.k-plus-s.com/ir Lutz Grüten Head of Investor Relations Phone: +49 561 / 9301-1460 Fax: +49 561 / 9301-2425 lutz.grueten@k-plus-s.com Katharina Volkmar Roadshow Management Phone: +49 561 / 9301-1100 Fax: +49 561 / 9301-2425 katharina.volkmar@k-plus-s.com Laura Schumbera Junior Investor Relations Manager Phone: +49 561 / 9301-1607 Fax: +49 561 / 9301-2425 laura.schumbera@k-plus-s.com Martin Heistermann Senior Investor Relations Manager Phone: +49 561 / 9301-1403 Fax: +49 561 / 9301-2425 martin.heistermann@k-plus-s.com Alexander Enge Investor Relations Manager Phone: +49 561 / 9301-1885 Fax: +49 561 / 9301-2425 alexander.enge@k-plus-s.com K+S Group 35
Financial Calendar Roadshow Frankfurt, Kepler Cheuvreux 16 August 2017 Roadshow London, Redburn 24 August 2017 Commerzbank Sector Conference, Frankfurt 29 August 2017 JP Morgan European High Yield & Leveraged Finance Conference, London 8 September 2017 Credit Suisse 30th Annual Basic Materials Conference, New York 11-13 September 2017 UBS Best of Germany One-on-One Conference, New York 13-14 September 2017 Annual Berenberg Food Ingredients & Chemicals, London 13 September 2017 Berenberg/Goldman Sachs 6th German Corporate Conference, Munich 18-20 September 2017 Baader Investment Conference, Munich 21 September 2017 Quarterly Report, 30 September 2017 15 November 2017 Annual Report 2017 15 March 2018 Quarterly Report, 31 March 2018 10 May 2018 Annual General Meeting, Kassel 15 May 2018 K+S Group 36
Disclaimer No reliance may be placed for any purpose whatsoever on the information or opinions contained in the Presentation or on its completeness, accuracy of fairness. No representation or warranty, express or implied, is made or given by or on behalf of the Company or any of its respective directors, officers, employees, agents or advisers as to the accuracy, completeness or fairness of the information or opinions contained in the Presentation and no responsibility or liability is accepted by any of them for any such information or opinions. In particular, no representation or warranty, express or implied, is given as to the achievement or reasonableness of, and no reliance should be placed on any projections, targets, ambitions, estimates or forecasts contained in this Presentation and nothing in this Presentation is or should be relied on as a promise or representation as to the future. This presentation contains facts and forecasts that relate to the future development of the K+S Group and its companies. The forecasts are estimates that we have made on the basis of all the information available to us at this moment in time. Should the assumptions underlying these forecasts prove not to be correct or should certain risks such as those referred to in the Annual Report materialise, actual developments and events may deviate from current expectations. Given these risks, uncertainties and other factors, recipients of this document are cautioned not to place undue reliance on these forecasts. This Presentation is subject to change. In particular, certain financial results presented herein are unaudited, and may still be undergoing review by the Company s accountants. The Company may not notify you of changes and disclaims any obligation to update or revise any statements, in particular forward-looking statements, to reflect future events or developments, save for the making of such disclosures as are required by the provisions of statue. Thus statements contained in this Presentation should not be unduly relied upon and past events or performance should not be taken as a guarantee or indication of future events or performance. This presentation has been prepared for information purposes only. It does not constitute an offer, an invitation or a recommendation to purchase or sell securities issued by K+S Aktiengesellschaft or any company of the K+S Group in any jurisdiction. K+S Group 37
K+S Share WKN: KSAG88 ISIN: DE000KSAG888 Ticker-Symbols: Bloomberg SDF / Reuters SDFG K+S ADR CUSIP: 48265W108 ADR Ticker-Symbol: Bloomberg: KPLUY / Reuters: KPLUY.PK K+S Bond 12/2018 WKN: A1Y CR4 ISIN: XS0997941199 K+S Bond 12/2021 WKN: A1Y CR5 ISIN: XS0997941355 K+S Bond 06/2022 WKN: A1P GZ8 ISIN: DE000A1PGZ82 K+S Bond 04/2023 WKN: A2E 4U9 ISIN: XS1591416679 K+S Aktiengesellschaft Bertha-von-Suttner-Straße 7 34131 Kassel Germany Internet: www.k-plus-s.com Investor Relations phone: +49 (0)561 / 9301-1100 fax: +49 (0)561 / 9301-2425 email: investor-relations@k-plus-s.com K+S Group 39