K+S Aktiengesellschaft Goldman Sachs Seventh Annual European Chemicals Conference London, 16 March 2018 Thorsten Boeckers, CFO Martin Heistermann, Senior Investor Relations Manager
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 2
Content A 1 2 B C K+S Unique Strategic Position Potash and Magnesium Products Salt Current Trading Outlook K+S Group 3
A fresh perspective on our existing portfolio Production focus Customer focus ( m) Key financials 2017 1 Agriculture MOP Premium Fertilizers Fertigation 1,428 Revenue 225 EBITDA 39% Revenue share 16% EBITDA- Margin Potash Salt 2 Industry Chemical Pharma Ind. Specialties Food Processing 1,176 Revenue 238 EBITDA 32% Revenue share 20% EBITDA- Margin + 3 Communities 566 De-Icing 16% 18% 104 Revenue EBITDA Revenue share EBITDA- Margin 4 Consumers Consumers 454 57 13% 12% Revenue EBITDA Revenue share EBITDA- Margin K+S Group 4
'One K+S' creates the most value for all stakeholders Customers "Customer first" approach reflected in new business cut along customer segments Spotlights on our hidden champions Shareholders Measureable synergies from leveraging our scale Ample growth and profitability opportunities identified Employees Reduced complexity, less overhead More attractive career options in integrated business Clear commitment to our production sites Society Clear commitment to sustainability Continued, value-adding investments in Germany and abroad K+S Group 5
We will implement our new strategy in two phases Phase 1: Transformation Phase 2: Growth 2017 Reduce indebtedness Realize synergies 2020 Tapping the full potential of our existing assets Exploring new adjacent growth areas 2030 Advance corporate culture Increased share of specialties Shaping the organization and focusing towards our clients Net debt/ halved EBITDA vs. H1/2017 Synergies > 150m Investment grade rating achieved in 2023 EBITDA-Ambition 3bn ROCE >15% Revenue growth beyond 2030 >4% K+S Group 6
Phase 1: We will transform ourselves and create a solid financial base Realize Synergies Strengthen financial base Operations: Lean management Operations: Digital mining Procurement Evaluate tailings piles optimization Sales excellence Supply chain and logistics G&A optimization Reduce indebtedness > 150m p.a. run rate after inflation by 2020 YE Shaping the organization Customer first: Lift our potential Focus on customer segments Agriculture, Industry, Communities and Consumers to better penetrate high-margin, non-commodity business Increase financial transparency Make performance transparent along new customer segments Build One Company Commit to existing portfolio Break up silos and create the foundation to generate synergies K+S Group 7
We aim for a positive free cash flow in 2019 Phase 1: Transformation Free cash flow bridge approximation 2016-2020 Based on current portfolio inorganic growth not included Phase 2: Growth Ambition Fully invested in best class assets like Bethune + CapEx + Werra + Bethune - FX - WC Investment grade rating achieved in 2023 EBITDA ROCE 3bn >15% Actual 2016 2017 2018e 2019e 2020e 2030 Massive positive swing in free cash flow K+S Group 8
Phase 2: Growth opportunities in our Customer Segments Revenue shares and CAGR 2016-2019-2030 Growth initiatives from 2020 7% 5% Organic 2% Inorganic ~ 11bn 45% Tapping the potential of existing assets and expansion options Expand offering of specialty fertilizers Develop strong position in fertigation Develop advanced business models (e.g. agroplatform in Africa) 3.5bn 43% 8% 35% Strengthen portfolio of specialty industrial products Expand offering for the pharma industry Grow into Asia Agriculture Industry Consumers Communities 37% 33% 13% 17% 28% 12% 17% 9% 6% 4% 10% 10% Leverage branding capabilities in consumer salt Grow into Asia Strengthen position in existing markets 2016 2019 2030 K+S Group 9
What we ve done what our next steps are Update on Shaping 2030 Ongoing tasks!!!!!! Setting up project management Preparing to decide on new organization and reporting lines Start of bottom-up validation of synergies (> 150 m by 2020) Management remuneration (LTI) linked to share price performance First concept about future organization and KPIs Bottom-up validation of synergies done confident to reach at least 150 m Next to come!!! Projects to lift synergies are starting Final concept about future organization incl. KPIs done Sustainability targets and KPIs defined. Possible use of solid residues clarified We will keep you posted with updates on our Strategy in H1/2018 and at a CMD at 5 Sept 18 K+S Group 10
Content A 1 2 B C K+S Unique Strategic Position Potash and Magnesium Products Salt Current Trading Outlook K+S Group 11
Potash and Magnesium Products Long-Term Dynamics Positive for Fertilizer Potash is indispensable for plant growth Less arable land but more protein consumption per capita 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 12
Potash and Magnesium Products Unique Portfolio Makes us More Robust KCL (MOP) 3.2 6.7 Industrial products 0.8 Specialties 2.7 Health Care & Nutrition Industrial potash Kieserite Korn-Kali SOP Broad portfolio of specialty products Flexibility Stability Partly following different trends and seasons Basis: 2017 Sales volumes in million tons Basis: 2017 Revenues Europe 59% South America 16% Other 8% Asia 17% Close proximity to our main customers provide logistical advantages Shipments to overseas customers at competitive costs from Hamburg harbor Strong and long-standing customer relationships K+S Group 13
Potash and Magnesium Products Potash Price Comparisons MOP gran. Europe vs. Brazil (Source: FMB) US$/t 600 /t 600 500 400 Brazil (US$/t, Granular, cfr) 500 400 300 200 Europe ( /t, Granular, cfr) 2012 2013 2014 2015 2016 2017 2018 K+S average selling price versus selected peers (local currencies) 300 200 K+S K+S Basis: Q1 2012 Peers Basis: Q1 2014 Peers Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2014 Q1 2015 Q1 2016 Q1 2017 K+S Group 14
Potash and Magnesium Products New approach to environmental challenges works Track Record Saline wastewater significantly reduced!! Implementation of measures to limit the risk of outage days KCF 1 commissioned (reduction of saline wastewater by 20%) Amount in million cubic meter 20!! K+S mandated advisor K-UTEC to carry out a concept to further reduce saline wastewater Expansion of tailings pile capacity Hattorf (Werra): Early commencement granted 14 7 7 5.5!!! K+S reaches settlement with BUND Thuringian municipality of Gerstungen and K+S end their long-lasting dispute Preparing for future approval procedures and further wastewater reductions 1) Kainite Crystallization and Flotation Facility 1997 2006 2016 2017 2018 Discharge Deep-well Measures Gap K+S Group 15
Potash and Magnesium Products Bethune up and running "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 16
Potash and Magnesium Products Bethune - 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 17
Content A 1 2 B C K+S Unique Strategic Position Potash and Magnesium Products Salt Current Trading Outlook K+S Group 18
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 19
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 20
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 Unique natural hedge 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 21
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 22
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 23
Content A 1 2 B C K+S Unique Strategic Position Potash and Magnesium Products Salt Current Trading Outlook K+S Group 24
P&L million Q1/16 Q2/16 Q3/16 Q4/16 FY/16 Q1/17 Q2/17 Q3/17 Q4/17 FY/17 Revenues 1,096 732 688 941 3,457 1,126 742 723 1,032 3,627 EBITDA 285 83 56 94 519 211 102 77 187 577 Margin 26% 11% 8% 10% 15% 19% 14% 11% 18% 16% EBIT I 218 15-31 28 229 137 29 12 93 271 Financial result -13-15 -9-15 -52-9 -4-9 -5-26 EBT, adjusted 205 0-41 13 177 129 25 3 87 244 Tax rate, adjusted 28% 29% 34% 23% 26% 27% 24% 33% 66% 41% Net income, adjusted 148 0-27 10 131 95 19 2 30 145 EPS, adjusted 0.77 0.00-0.14 0.05 0.68 0.49 0.10 0.01 0.16 0.76 Tangibly improved operating earnings EBITDA and EBIT I, despite 43m effect for Sigmundshall closure Potash pricing continues to recover, SOP prices have bottomed out Higher product availability at the integrated Werra plant; no days of outages in Q4/17 Higher volumes in Salt in Q4 The adjusted key figures only include realized 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 25
Cash Flow and Balance Sheet million Q1/16 H1/16 9M/16 FY/16 Q1/17 H1/17 9M/17 FY/17 Operating cash flow 294 359 390 445 267 384 383 307 - Investing cash flow (pre sale/ purchase of securities) -243-537 -847-1,222-212 -410-623 -697 Adjusted free cash flow 50-178 -456-777 55-26 -241-390 CapEx 280 643 904 1,171 277 410 568 811 Net debt (-) -2,367-2,860-3,180-3,584-3,614-3,745-3,939-4,141 t/o Net financial debt (-) -1,315-1,761-2,052-2,401-2,440-2,592-2,780-2,974 Net debt/ EBITDA (LTM) 2.5 3.6 4.9 6.9 8.1 8.1 8.1 7.2 Equity ratio 52% 49% 48% 47% 48% 45% 44% 43% Operating cash flow lower than last year due to higher Working Capital and FX CapEx came down as high investments at Bethune in Canada came to an end; FCF improved significantly Net Debt/ EBITDA peaked in 2017 K+S Group 26
Potash and Magnesium Products million Q1/16 Q2/16 Q3/16 Q4/16 FY/16 Q1/17 Q2/17 Q3/17 Q4/17 FY/17 Revenues 461 371 302 399 1,532 474 387 358 485 1,704 EBITDA 137 50 5-8 185 81 71 42 74 269 Margin 30% 14% 2% -2% 12% 17% 18% 12% 15% 16% EBIT 102 15-49 -35 34 42 31 2 6 81 Avg. selling price ( /t) 272 250 239 246 253 260 252 253 250 254 Sales volumes (million tons) 1.69 1.48 1.26 1.62 6.06 1.82 1.54 1.41 1.94 6.71 Cash Unit Costs 1 192 217 236 251 222 216 205 224 212 214 Demand remains strong across all regions ASP slightly up in Q4 (YoY) due to higher product availability and better market pricing; sequentially down as Bethune volumes came in Adverse FX-effect Cash unit costs peaked Production problems at Werra plant addressed 1 (Revenues EBITDA) / Sales volumes K+S Group 27
Salt million Q1/16 Q2/16 Q3/16 Q4/16 FY/16 Q1/17 Q2/17 Q3/17 Q4/17 FY/17 Revenues 595 319 346 502 1,762 611 316 329 507 1,762 EBITDA 150 33 47 93 322 135 29 37 124 325 Margin 25% 10% 14% 18% 18% 22% 9% 11% 24% 18% EBIT 123 5 18 58 204 106 0 17 100 223 Sales volumes (million tons) 7.1 2.9 3.5 5.8 19.4 7.5 2.8 3.5 6.5 20.3 De-icing 4.9 0.6 1.0 3.5 10.1 5.1 0.6 1.0 4.0 10.7 Non de-icing 2.2 2.3 2.5 2.3 9.3 2.4 2.3 2.5 2.5 9.7 Average selling prices ( ) De-icing 64 53 52 59 60 61 54 50 55 58 Non de-icing 122 123 113 124 120 120 122 109 110 115 Non de-icing: Vols up in Q4 (YoY), but prices down due to higher share of chemical/industrial salt De-icing: Better demand in Europe more than offsets weak US-pricing in Q4/17 On track to reach SALT 2020 EBITDA-target of at least 400m K+S Group 28
Debt Instruments (as of Dec. 31, 2017) Bonds Bank loans, Leasing, others Schuldschein loans Syndicated credit line 1 2.1 billion avg. maturity: 3.75 yrs about 220 million 765 million avg. maturity: 2.75 yrs 1 billion expires in 2020 1 As an alternative instrument a Commercial Paper program is in place K+S Group 29
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) Loan 45 million (mat. 2020) Schuldschein 335 million (mat. 2021) Bond III 500 million (mat. 2021; coupon 4.125%) Bond II 500 million (mat. 2022; coupon 3.000%) Schuldschein 65 million (mat. 2022) 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 and a Commercial Paper program are in place until 2020 K+S Group 30
NetDebt/EBITDA development 8,0 7,0 6.9 7.2 6,0 5,0 X-fach 4,0 3,0 2,0 1,0 0.7 1.1 1.0 1.2 0.8 3.2 1.8 2.6 0.4 3.3 0.8 1.6 0.5 1.8 0.8 1.1 2.3 1.8 Legacy 0,0 K+S Group 31
Dividend Policy 50% 45% Target payout ratio of 40-50% 10% Earnings-based dividend policy 40% 35% 8% Payout ratio of 40 50% of adjusted net profit 30% 25% 20% 6% 4% Dividend proposal for 2017: 0.35 per share 15% 10% 2% 5% 0% 2013 2014 2015 2016 2017 1 0% Payout ratio (lhs) Dividend yield (rhs) 2 1 Proposal to the AGM. 2 Based on year-end share prices K+S Group 32
Currency Management Transaction Translation Freight/ other costs CAD/EUR USD/EUR USD/CAD USD/EUR K+S Group 33
Currency Management 2018 1,25 1,45 1,20 Limitation of risk Planned EUR/USD Worst Case 1,40 Limitation of chance EUR/USD 1,15 1,10 Best Case 1,35 1,30 Best Case USD/CAD 1,05 Limitation of chance 1,00 Q1 Q2 Q3 Q4 2017: Realized average exchange rate: 1.12 EUR/USD (incl. premium) 2018: Anticipated average exchange rate: 1.15 EUR/USD (incl. premium)¹ 1,25 1,20 Planned USD/CAD Limitation of risk Worst Case Q1 Q2 Q3 Q4 2017: no operational hedging transactions 2018: Anticipated average exchange rate: 1.31 USD/CAD (incl. premium)² 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 ¹ Premise: based on planned rate of 1.20 EUR/USD for 2018; ² Premise: based on planned rate of 1.25 USD/CAD for 2018 K+S Group 34
Content A 1 2 B C K+S Unique Strategic Position Potash and Magnesium Products Salt Current Trading Outlook K+S Group 35
Guidance 2018: EBITDA 1 million Significant increase 2 577 Main effects: + Higher sales + Cost improvement Main effects: + Potash prices (slight increase) Main effects: + Potash volumes (outage days) + Tangibly higher salt volumes Main effects: - Planning assumption: 1.20 EUR/USD Main effects: + Sigmundshall Actual 2017 Bethune Price Volume Currency Other effects (net) 2018e 1 The basis for EBITDA is EBIT I, that only includes the realized result from operating forecast hedges. 2 Based on average weather conditions in both business units. K+S Group 36
Guidance: Housekeeping items FY 2016 FY 2017 FY 2018e Group Revenues 3.5bn 3.6 bn tangible increase EBITDA 519m 577m significant increase EBIT I 229m 271m significant increase Financial result -52m -26m significantly more negative Free cash flow, adjusted -777-390 Significant improvement CapEx 1.2bn 811m significant decrease Average fx-rate (EUR/USD) 1.11 1.13 1.20 Production Outage Days (Werra) ~200 days ~25 days 0 days Potash and Magnesium Products Salt Global sales volumes 1 ~ 66m tons ~ 69m tons At least stable K+S sales volumes 6.1m tons 6.7m tons significant increase Average selling price 253 /t 254 /t slight increase K+S sales volumes 19m tons 20m tons tangible increase t/o de-icing 10m tons 11m tons tangible increase 1 Incl. 4mt of potassium sulphate and potash grades with lower mineral content K+S Group 37
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 38
Financial Calendar CFO Roadshow Frankfurt, MainFirst 15 March 2018 Goldman Sachs 7th European Chemicals Conference with CFO, London 16 March 2018 Non Deal Fixed Income Roadshow Frankfurt, DZ Bank 21 March 2018 Non Deal Fixed Income Roadshow London, Goldman 22 March 2018 Roadshow Paris, Bank of America Merrill Lynch 6 April 2018 Roadshow Zurich, UBS 11 April 2018 Solventis Aktienforum with CFO, Frankfurt 12 April 2018 Roadshow Middle East with CFO, Bankhaus Lampe 19 April 2018 Bankhaus Lampe Deutschlandkonferenz, Baden-Baden 20 April 2018 Quarterly Report Q1/18 14 May 2018 Annual General Meeting 15 May 2018 Half-yearly Financial Report H1/18 14 August 2018 Capital Markets Day in Bethune, Canada (save-the-date) 5 September 2018 K+S Group 39
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