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The recent earnings call for K+S highlighted the company’s strategic focus on potash amid a strong global demand environment. According to InvestingPro data, K+S has demonstrated strong financial health with a GOOD overall score of 2.97 and maintains an attractive dividend yield of 5.03%. While specific earnings per share (EPS) and revenue forecasts were not detailed, the company outlined a robust future with significant growth potential in its potash operations. The stock showed minor fluctuations, reflecting a cautious investor sentiment amid broader market dynamics, though the company’s current ratio of 3.26 indicates strong liquidity position.
Key Takeaways
- K+S expects 2025 EBITDA to align with 2024 levels, with a focus on cash flow positivity.
- The Bethune mine is set to boost production by 100,000 tonnes in 2025.
- Global potash demand is projected to increase by 2-3 million tons in 2025.
- The company is implementing a gas hedging strategy to manage energy costs.
Company Performance
K+S reported that its EBITDA for 2024 met expectations, setting the stage for a stable 2025. With last twelve months EBITDA at 597.71M USD, the company is prioritizing its Sulfate of Potash (SOP) production under the "SOP Max" strategy, which aligns with its focus on specialty fertilizers. This strategy is expected to enhance its market position, particularly as competitors in Russia and Belarus face production constraints. For deeper insights into K+S’s financial performance and strategic positioning, InvestingPro subscribers can access comprehensive analysis and additional ProTips, including detailed dividend history and growth metrics.
Financial Highlights
- Maintenance CapEx for 2025 is estimated at €400 million.
- Additional €150 million CapEx allocated for the VERA 2060 project and Bethune expansion.
- Positive cash flow anticipated from inventory reductions in 2024.
Outlook & Guidance
K+S has provided guidance for 2025, with EBITDA expected to remain at 2024 levels, contingent on MOP price recovery. The company targets a production volume of 7.0-7.7 million tonnes. Despite elevated capital expenditures, the company aims for at least breakeven free cash flow, supported by strategic inventory management. Based on InvestingPro Fair Value analysis, K+S appears fairly valued at current levels, with a P/E ratio of 91.74 reflecting market expectations for future growth. The company’s revenue declined 15.54% in the last twelve months, highlighting the importance of its strategic initiatives for future growth. Discover more detailed valuation metrics and expert analysis in the comprehensive Pro Research Report, available to InvestingPro subscribers.
Executive Commentary
Burkhard Lohr, CEO of K+S, stated, "We are very happy with the current spring season with strong potash demand worldwide." This sentiment underscores the company’s confidence in its strategic direction and market positioning.
Risks and Challenges
- Potential volatility in potash prices could impact EBITDA forecasts.
- Supply chain disruptions may affect production timelines and costs.
- Environmental project challenges, particularly in Springen, could pose operational risks.
- Energy costs, despite hedging, remain a concern due to market fluctuations.
Q&A
During the earnings call, analysts inquired about the potential impact of US tariffs on Canadian potash, which could influence market dynamics. The company also addressed the time lag in pricing adjustments and detailed its energy cost management strategies, which are crucial in the current economic climate.
Full transcript - Steadfast Group Ltd (SDF) Q4 2024:
Julia, Moderator/Host, K+S: Ladies and gentlemen, welcome to the K plus S Full Year twenty twenty four Earnings Call. We hope you had a chance to review our posted slides as well as our documents available on our website. After some opening remarks by Doctor. Loire, we will directly jump into Q and A. Some technical notes, please refer to our disclaimer on page two of the presentation, then a note on data privacy.
Please note that the Teams session will be recorded, webcasted, and be available as a replay on our homepage afterwards. People asking a question in the Teams session have to be aware that by turning on their camera and microphone, they give consent to saving and replaying video and audio sequences. Now I would like to turn over to Doctor. Lohr for the opening remarks.
Burkhard Lohr, CEO, K+S: Thank you, Julia. Ladies and gentlemen, a warm welcome from the three of us as well. Despite the challenging environment of low potash prices, we have successfully demonstrated that we are on track. At million free cash flow was better than expected. EBITDA reached million.
Again, we benefited from our global positioning and our strong specialties business. For the full year 2025, we expect EBITDA to range between million and million. This translates into a midpoint at about the level of 2024. For the upper end of the range, we would need a tangible price recovery for MOP in Brazil during the spring season. And this has to spill over into other regions and product groups and hold up during the second half of twenty twenty five.
The lower end would work with prices at the level of the end of twenty twenty four. We expect free cash flow to at least breakeven also for 2025 despite the planned elevated CapEx. We are very happy with the current spring season with strong potash demand worldwide. So we are in a very promising environment right now as we speak. Before we take your questions, I would like to ask my colleague, Jens Coiten, to introduce himself briefly.
Yeah. Thank you very much,
Jens Christsen Coiten, Board Member/Incoming CFO, K+S: Burkhard, and a warm welcome from my side as well. My name is Jens Christsen Coiten, newly appointed member of the board of executive directors since February, currently responsible for legal tax, regulatory affairs, new business areas and procurement. And I will take over from Christian in June as CFO, accompanied with the responsibility for finance and controlling. Yeah. Some personal background.
I joined K plus S in 2014. My education is I’m a lawyer, became general counsel, member of the management team. And, yes, my responsibilities were complemented in different ways. And, yes, now I’m happy to be in the board and happy to ask you or answer your questions afterwards. Thanks.
Julia, Moderator/Host, K+S: If you would like to ask a question, please use the hand signal and write your name and the name of your research house in the Microsoft Teams chat function. We will then call you individually, and you can address your questions to us live. Please switch on your camera. One more request as usual. We would like to answer the questions one by one.
So if you have multiple questions, please ask one question at a time, and we will answer it first. After that, you will have the opportunity to ask further questions. This brings us to the first question of Arun Teccarelli from Berenberg.
Arun Teccarelli, Analyst, Berenberg: Hello. Good morning. Thanks for taking my question and congratulations on your euros, Christian and Jens. My first question is on your EBITDA guidance for 2025. So you generated million in 2024 with an average MOP price of per tonne.
Maybe can you help me understand why the midpoint is flat, where SOP prices today remain flattish, but M and P in Brazil is at 3.35%. So maybe the moving parts of costs would be also useful to understand.
Burkhard Lohr, CEO, K+S: Yes. First of all, you need to remember that we started in 2024 with higher prices. So in the course of 2024, the prices were falling unfortunate. I think we will later on discuss why this was and why the prices are now increasing. Now we are in environment since December to have increasing prices, and we will have higher costs from energy.
And we had a very, very positive bargain agreement, but it means a higher HR cost as well. And if you put all these bits and pieces together, you end up with an EBITDA in the midpoint. Again, there’s a good possibility that we end up somewhere above the midpoint, but let’s talk about the midpoint. The midpoint is the result of all these bits and pieces.
Arun Teccarelli, Analyst, Berenberg: Thank you. My second question is on your volume guidance. You mentioned at the beginning of the conversation that you are very happy about the Sprint piece. So what is the main driver behind the flattish volume guidance at the midpoint for this year?
Burkhard Lohr, CEO, K+S: Yes. Thank you for that question. First of all, what is not the driver? The demand is not the driver. The demand is strong.
If we had more volume, we could sell more volume. But, you know, our capacity is limit as it is for all our competitors. And if we talk about a range of seven to seven point seven and seven point five, It is, can we move all products, so logistics? From time to time, we have issues with the weather, with the performance of Deutsche Bahn and others. And do we have a hiccup with our production?
It doesn’t look like that. But as year is still young, we need to open a range, but it’s not the demand.
Arun Teccarelli, Analyst, Berenberg: And maybe a final one on the supply side. What are the latest news on the potential export quota from Russia?
Burkhard Lohr, CEO, K+S: For Europe?
Arun Teccarelli, Analyst, Berenberg: Yes.
Burkhard Lohr, CEO, K+S: As far as I know, there is no change in the export quote for Russian product, which is close to 800,000 tons. In ’twenty three, they have almost not used it at all. Last year, they have used big parts of that. But the good news of talking about Russia and I would open the discussion for Belarus as well, They are back in the market they have been back in the market in 2024 already with almost the entire available capacity. And that means the additional demand that we are are expecting runs into limited supply.
That’s the reason for the increasing prices. And I would be surprised if this would find a stop in the near future.
Arun Teccarelli, Analyst, Berenberg: Thank you very much.
Burkhard Lohr, CEO, K+S: Thank you.
Julia, Moderator/Host, K+S: Now we have one question from the room here. It’s Christian Freitz from Kepler Cheuvreux.
Christian Freitz, Analyst, Kepler Cheuvreux: Yes. Thank you very much. First question maybe, where do you see the Latin AmericanBrazilian market going structurally? I noticed that Q4, at least in terms of sales, I guess, the same was true in terms of volumes was up. But overall, 24% was heavily down.
Do you see a normalization of that market in terms of demand? And put you also in context with Eastern European volumes, would you still see that market hampered by European Eastern European imports?
Burkhard Lohr, CEO, K+S: Yes. Thank you for that question, Mr. Feitz. Brazil, of course, is currently the powerhouse of our industry and it runs demand wise from one record to the other. But it’s also the place where we meet all our competitors.
And last year, we have seen an environment where, Uralkali and Belarus, Uralkali was still fighting for a new market position, which had an typical outcome, high demand, but pressure on prices. That’s why we have looked for other areas with higher netbacks. And the good thing is that we have the flexibility to move products to leave more in Europe, which has still a very good price environment to avoid India, for example, with a very low price. And we did the same in Brazil. But currently, prices are increasing, and that means we most probably will increase our stake in Brazil.
Christian Freitz, Analyst, Kepler Cheuvreux: Okay. Thanks. A question around hedginghedging losses. I noticed, if my numbers are correct, that you had a hedging loss in Q4 of something like million, million. Can you elucidate that a little bit?
And then also, can you talk about gas hedging for ’twenty five, ’twenty six?
CFO, K+S: Yes. Our hedging strategy is the one is for the U. S. Dollar. We have the FX hedges.
And there, we saw based on the volatility of the U. S. Dollar, there, we had some effects at the end of the year, but that’s only a calculation effect that you see finally in the P and L. With regard to the gas hedges, we are for the current year, we have hedged roundabout 50% at a good roundabout a megawatt hour. And we already hedged 40% for 2026.
If you compare the hedge in 2024 we had, that was below so there we see some increases in energy costs. But we want to avoid that we have the peaks over the year because the spot price were pretty high. And that’s the current situation with the hedging, I guess, strategy. And what’s important to compare, if you see the European market and the Canadian where we have our other side, there we are talking about EUR 6 megawatt hour. And that’s why we are very happy to finally have made this investment in Bethune.
Julia, Moderator/Host, K+S: And Christian, with regards to the hedging effect, it is only the one in the EBIT2. You know that these are kind of the open position, so just evaluation effect. If you want to know the effect on EBITDA in Q4 isolated in EBITDA or EBIT1, if you want, so it was plus four. So not meaningful.
Christian Freitz, Analyst, Kepler Cheuvreux: Thanks. Very helpful. On Bethune, one final question for me. I mean, we are already pretty much done with Q1. You have a good visibility into the year, I would believe.
Can you share with us your ramp up plan for Bethune in terms of secondary mining, the delta?
Burkhard Lohr, CEO, K+S: Yes. So we ended twenty twenty four with 2,200,000 tonnes. And we indicated that we would see 100,000 to 150,000 tonnes in addition. In average, it will not be every single year exactly that amount, but we expect another 100,000 tonnes more in Bethune than 2024.
Christian Freitz, Analyst, Kepler Cheuvreux: Okay. So closer to the 100,000 than the 150,000, which is the range you have provided since quite a few years?
Burkhard Lohr, CEO, K+S: Yes.
Christian Freitz, Analyst, Kepler Cheuvreux: Thank you. Welcome.
Julia, Moderator/Host, K+S: The next question comes from Konstantin Wichard from Baader Bank, and he just informed me that his camera doesn’t work, unfortunately, but we hopefully can hear you, Konstantin.
Konstantin Wichard, Analyst, Baader Bank: Yes. Hello. Can you hear me?
Burkhard Lohr, CEO, K+S: Yes.
Konstantin Wichard, Analyst, Baader Bank: Perfect. Thank you so much. It’s a shame that it doesn’t work this time because it didn’t work last time. I’m sorry for that. That’s unfortunate.
Burkhard Lohr, CEO, K+S: Let’s see what it does next time.
Konstantin Wichard, Analyst, Baader Bank: Thank you so much for taking my questions anyways. Maybe just first of all, first question coming back to the cost items. You talked a bit about personnel and energy, but you expect some relief on the material cost side. Could you give some quantification on that?
CFO, K+S: Yes. For 2025, we expect some headwinds from the energy side. As I just mentioned that our hedging strategy is currently that we are around compared to below in last year. Then we had with the personal cost, just signed a bargaining agreement, a collective bargaining agreement. And on the other side, we have some we expect some lower costs, especially with materials, technical equipment.
And these are, yes, from our recruitment department, the information we included in our guidance.
Konstantin Wichard, Analyst, Baader Bank: Yes, I see. But okay, so no quantification of material cost relief because I think last year, we got a pretty clear million cost relief from Energy and Logistics, which was a clear number. So just asking on on a clear number.
Julia, Moderator/Host, K+S: We said for all of it together, mid to high double digit headwind.
Konstantin Wichard, Analyst, Baader Bank: Okay. Thank you. Then, also coming back gas prices could be around €60 per megawatt hour, which would be still higher in Europe. So I’m just curious if that’s also your assumptions there or what do you think is the midterm price forecast in Europe and how is that affecting your hedging strategy? Should we come back at some point to the levels of like 80% to 90% of gas hedged or will it always be a more, yes, more open exposure from now on?
CFO, K+S: Yes. With regard to the gas price and the you just mentioned, it was a peak that you saw for the spot market. And for the spot market, that is pretty volatile currently. There you see the one afternoon, 60, the next afternoon, 45. So that’s why it’s so important that we have a hedging strategy that we already locked in 50% for 2025.
And what we can see is what we expect and what’s also the energy company expected, especially in the second and third quarter that we will see the normal dip in the summertime because the filaments of the cabins are pretty good and the weather is currently also warm. So we are very happy or expect that we will be around Yes. I
Konstantin Wichard, Analyst, Baader Bank: mean, more midterm. How should we think about that? Are you planning at some point to go back to hedging 80% to 90% one year ahead? Or were you always
CFO, K+S: at 4% exposure? Yes. No. That depends finally on the current situation at what level you can finally lock in the price levels, and we want to optimize this. And normally, we optimize our hedging levels in Q2 and Q3, so mainly during the summertime, the spring and summertimes where the prices are lower compared to the wintertimes.
So that’s no surprise currently.
Konstantin Wichard, Analyst, Baader Bank: Okay. I keep it like that. One question remaining for now maybe. If I remember correctly, last year, a couple of competing Manheim SOP producers always had some operational difficulties with which also helped you on the specialty side. How’s this market evolving currently and what do you expect for 2025?
Burkhard Lohr, CEO, K+S: Yes. There’s not much change. It’s still difficult and expensive to produce SOP following the Mannheim process. And that’s why this market is still tight, and that’s why the prices are still high. Of course, now with a high with a very quickly increasing MOP prices, the premium is decreasing a little bit, but we are sure that we will defend a very attractive premium on this market because, again, it’s tight.
Julia, Moderator/Host, K+S: The next question comes from the room here. It’s Mikhail Schafer from ODDO.
Mikhail Schafer, Analyst, ODDO: Thanks for taking my two questions. The first one is, and maybe related to the last one, on your production outlook. Last year, I think your Specialty Materials volumes gained something like 32% year over year. So there was strong mix effect towards more specialties at the expense of MOP, which I think the volume declined minus 6%. So now what you just described, how should we think about the product mix going into ’twenty five on the back of that?
This would be my first question.
Burkhard Lohr, CEO, K+S: Yes. Thank you, Mr. Sheffer, for a question. I mentioned earlier that we are very flexible in terms of going into the markets with the highest netbacks. We also have a little flexibility in our product portfolio.
So currently, we are running we call it internally SOP Max. That means more SOP and slightly less MOP and Kornkali because due to the pricing. We for the time being, we plan to do that until the mid of this year. And then we have to see what the market conditions are to either continue or lower the SOP volumes. So this flexibility is perfect.
And last year, we have not met our production targets volume wise, but we have met our earnings targets that due to that flexibility.
Mikhail Schafer, Analyst, ODDO: Thanks for that. Second question is coming back to Russia. We briefly touched the import quota. So however, taking a bit step back basically, thankfully, now we are getting peace talks and things are moving in the right direction. From your point of view, how do you see basically the European Polish market evolving?
Which role do the Russians and Belarusians play from his perspective if we are getting a piece between Russia and Ukraine and the market is sort of stabilizing? How should we think about this one then?
Burkhard Lohr, CEO, K+S: First of all, all of us would be more than happy to see a peace and not people dying totally independently of our business. But the second thought is what would a peace mean for our business. And here we are more than relaxed because as I said earlier, they are back in the markets and they cannot do more than they are doing currently. The opposite is true. They are obviously struggling.
They have a stronger domestic market. They have maintenance issues, etcetera. So they have rather less to expect than more to expect. And if they should come back into Europe with higher volumes, then they leave room in other markets. So that is a totally relaxed situation, and we would be more than happy to see peace.
Julia, Moderator/Host, K+S: And you would always have to still ask yourself, does peace mean that the sanctions against Belarus are lifted? Because they were not connected with the war originally. The next question comes from Axel Hellinghaus from the
Axel Hellinghaus, Analyst, Deutsche Bank: Okay. Thank you for taking my question. Can you please outline the impact of the planned U. S. Tariffs of 25% on Canadian products?
Or if they would come, how you expect the probabilities? What does it mean for K plus S? And what does it mean for regional price developments, especially in the coming months? And what mid long term scenario do we expect?
Burkhard Lohr, CEO, K+S: Thank you. Difficult question because that situation is changing daily. But we I try to to to give you an overview where we are standing. First of all, yes, 25% is is mentioned for products going from Canada into into The US and some products from Europe into The US. But potash is a critical mineral, and for potash, it’s only 10%.
So usually, you raise tariffs to protect your local industry, but there is almost no local US potash industry. So what would be the outcome? Farmers have to pay the bill a %. The Canadian have already announced that they would put it on the existing premarket prices, and we would do the same. And if there would be a long lasting situation with high tariffs from Canada into The U.
S. And no tariffs on potash, which I believe will be the outcome from Europe into The U. S, we would have the opportunity to leave The U. S. Behind from Canada, no deliveries from Bethune, but to ship product into The U.
S. From Germany. What we are already doing with specialties, SOP goes into the almond industry into California. So in total, no risk, rather opportunity for K plus
Julia, Moderator/Host, K+S: The next question comes from Teams again. It’s Joel Jackson from BMO.
Joel Jackson, Analyst, BMO: Could you talk about trade goods? Could you talk about what was the impact on earnings in 2024 for trade goods? It’s increasing a lot the last few quarters. And what’s the outlook in 2025 for the trade goods part of the agricultural segment?
Burkhard Lohr, CEO, K+S: That’s a very good question. It goes close to zero. That’s why we want to ramp it down, the trade good business. Only the our African activities make sense. We are in Uganda and Kenya.
And here it makes sense, but all the other trade good activities we won’t will drive down.
Joel Jackson, Analyst, BMO: But we should expect it to be near zero in 2025?
Burkhard Lohr, CEO, K+S: Not that quickly, but from as I said, we still continue to have trade good business in Africa, but it will reduce significantly over the time.
Joel Jackson, Analyst, BMO: Okay. One thing is SOP prices, I think there’s been some shortage of sulfur and looks like SOP has been under very strong demand. I saw SQM’s results last week to potash price arising. The NOP over s over potash premium is shrinking a bit. You mentioned something similar going on with SOP.
So I’m trying to reconcile. Should not you be making more money in SOP this year than last year, with the demand for SOP being stronger, but some weird things going on with the premiums?
Burkhard Lohr, CEO, K+S: No. We have had a very high pricing in SOP. We were frankly, as we put together our plan in autumn last year, we were expecting some price pressure on SOP and which is not the case anymore. There’s even potential for higher prices. So exactly what you say, we are optimizing our netbacks in all products and there is a good chance for SOP.
And that’s why we are running SOP max in our production.
Joel Jackson, Analyst, BMO: And Perker, maybe a bit of a different question. As you think about ramping down here in your last few months in this role, what is the one thing you’re most proud of, the one accomplishment you’re most proud of? And what is the one thing that you think is the challenge that you’re going to leave, but is the one that the company has to really think about?
Burkhard Lohr, CEO, K+S: Wow. Difficult. The one thing I’m the most proud of, so when I start maybe when I started, we were every single month at risk to to lose production or even lose a total site due to the our environmental issues. And now nobody is talking about that anymore because we have achieved the environment. I called it environmental peace due to a lot of talkings to authorities, NGO, politicians, etcetera.
And that is maybe the biggest one single biggest event. And you’ve asked about the opposite side. It’s I would have been happy to announce we have the approval to discharge our borders in Springen. Unfortunately, that was not achieved and that most probably will not be achieved. We have found other opportunities to deal with our remaining much lower production of waters after very where our 02/1960 is finished, but that I would have loved to achieve before I leave.
Konstantin Wichard, Analyst, Baader Bank: Thank you.
Burkhard Lohr, CEO, K+S: Thank you very much for the questions.
Julia, Moderator/Host, K+S: The next question comes from Tristan Lamotte from Deutsche Bank.
Burkhard Lohr, CEO, K+S0: Hi, thanks for taking my two questions. First on the kind of general types of the market. I was wondering what you kind of think of as a maximum effective potash capacity at the moment? And maybe you could talk about the general trend on capacity additions and how much the recent outages have impacted sentiment recently? Thanks.
Burkhard Lohr, CEO, K+S: So
Julia, Moderator/Host, K+S: the capacity outtakes that we saw in the different region, how they impacted the market dynamic? Okay.
Burkhard Lohr, CEO, K+S: Yes. Having a market condition where everybody is producing with full capacity, so not like the years before where for political or geopolitical reasons, some producers were low in volumes. Now they are producing full steam. Having a market where we expect 2,000,000 to 3,000,000 tons more demand than in 2024. So every information like that, even if it’s only 300,000 ton, 400,000 ton, has an impact on the behavior of our customers, of our farmers, and we see that.
And that will lead in a long lasting price increase. And if you add all up, so 1,000,000 due to maintenance from Belarus, Three Hundred Thousand due to maintenance from Russia, Four Hundred Thousand due to higher demand in Russia, SQM shorter in SOP that are meaningful volumes. That’s why there is a huge potential. And I rather like to see prices like we’ve seen over the last few weeks, dollars 5 more, dollars 10 more a week or the second week than the price rocketing that we’ve seen in 2024 because that has a counter effect that we don’t like. So that is a very position we are a good position we are in.
And again, every 100,000 or 200,000 or 300,000 tons have a significant effect in this environment.
Burkhard Lohr, CEO, K+S0: And maybe second question. If I think about the cost headwinds that you mentioned year on year, it seems to leave quite a bit of additional tailwind tailwind needed from price at the midpoint. But I just wanted to understand what your assumptions there are for price at the midpoint and is there a benefit from Industry plus as well?
Burkhard Lohr, CEO, K+S: The line I think I have understood, Jochem, that the line is difficult. We have echo here. Yes, of course, the price development has to more than compensate the cost headwind. That is our expectation. And the second part was
Julia, Moderator/Host, K+S: If industry is also concentrated
Burkhard Lohr, CEO, K+S: in the business. Yes, Industry plus Thank you for that question because we talk not enough about Industry plus That business is developing very good. In both parts, the sole part, we have taken some price initiatives. We have tested the markets. We have expected to lose volumes.
The volume that we lost was by far lower than expected. So the return from the salt business is on a level that we have never seen before for Europe isolated. And of course, the potash products that run into the Industry plus business also have a very good price tag. So in all, it’s really an additional business which stabilizes the group.
Julia, Moderator/Host, K+S: The next question comes from Angelina Klasova from JPMorgan.
Burkhard Lohr, CEO, K+S1: I have two questions. And the first one is on the market environment. Could you please talk about your understanding of current inventory levels at key consumers? And I’m especially interested in China, Brazil, and also The US. There has been quite a lot of uncertainty around the tariffs recently, and also the expectations of buyers have likely gone up in terms of their potash price expectations through the year.
So do you think it could have affected, the the demand strength that you’re seeing currently? Or is it all underlying? Or could there be some inventory build happening right now?
Burkhard Lohr, CEO, K+S: Yes. Thank you for that question. We have I have explained the market environment, and that leads to the following. We are seeing the inventory levels on a very low level. We have seen over the last year the farmers going more to just in time buying due to the high volatility of Polish prices.
They don’t want to have a lot of inventories in their warehouses. But now with a high demand, in addition, we see low inventories. If you take China, you asked exactly about China, Brazil and U. S. China has released volumes out of their strategic reserve, meaningful.
So they are significant below the 300,000,000 tons that they want to have in hand for the strategic reserve. Brazil is again showing higher demand than in the year before, and there’s not much room with this demand. It all goes on the field into application. U. S.
Maybe is the only exemption because of the tariff discussion we see the farmers buying maybe a little bit quicker than before, but not to build high inventories to be to have a safe price tag on what they put on the field in the next season. So in total, in the system, there is not much available volume.
Burkhard Lohr, CEO, K+S1: Understood. Thank you very much. And my second question, it’s about free cash flow guidance. So we know that the EBITDA guidance for next year is a range. And then CapEx you’re guiding to close to five fifty.
But then free cash flow guidance is is sort of open ended of at least breakeven, and I’m just looking to understand as to why, it is not arranged.
Burkhard Lohr, CEO, K+S: Do you
Burkhard Lohr, CEO, K+S1: see the flexibility on the CapEx side? Or is it to accommodate any potential working capital movement? So how should we think about free cash flow? Say, for example, at the top end of your EBITDA guidance?
Burkhard Lohr, CEO, K+S: Yes. First of all, I think it’s I hope it was not a surprise that we are guiding at least breakeven because we announced already in on our Capital Markets Day in November 2021 during VERA two thousand and sixty, we have elevated CapEx and that means there is not much room for free cash flow. But still, we achieved million last year. On an EBITDA level, which is very close to the midpoint of the guidance of this year. And when we say at least a breakeven, that does not mean zero.
But we are in March. It’s still very early. And it would not make sense to give a more bullish or a more precise number. What we can assure is if we should see the lower end of this range, which from today’s perspective is not very probable, but it’s not totally off the table, then we are able to manage via CapEx the at least breakeven. In all other EBITDA points in that range, we should expect a positive and more than significant more than only zero free cash
Burkhard Lohr, CEO, K+S1: flow.
Julia, Moderator/Host, K+S: The next question comes from Lisa Deneff from Morgan Stanley.
Burkhard Lohr, CEO, K+S2: Hi. Thank you for taking my question. I just have one. Could you just remind us about how we should think about TriSlags four ks plus in the first half and maybe even the entire year? And when you expect some of these higher prices we’ve seen in the market, particularly in The US, which I know is a small market for you and Brazil, to be seen in your P and L?
Thank you.
Julia, Moderator/Host, K+S: So you mean the time lag, Lisa?
Burkhard Lohr, CEO, K+S2: Yes, the time lag. Yes, the difference between the market price and your realized pricing that comes into your P and L.
Burkhard Lohr, CEO, K+S: Okay. So in general, you can you should expect a time lag between three and four months. So what we are booking now in our P and L and what we will report soon with the first quarter was a deal from autumn twenty twenty four.
Julia, Moderator/Host, K+S: The next question comes from Konstantin Wechat from Baader again.
Konstantin Wichard, Analyst, Baader Bank: Hi. If I may, a couple of follow-up. Just coming back on the CapEx. I think if I remember correctly from the time we presented the VERA 02/1960 project, you were expecting about $150,000,000 additional CapEx in 2025 from that side. And I think if I remember correctly, 50,000,000 for each 100,000 tons you want to add in Bethune.
So could you remind us again of the maintenance CapEx and whether you are shifting certain CapEx for the VERA 02/1960? Or how do we derive this lower CapEx?
Burkhard Lohr, CEO, K+S: Yes. You that is totally correct what you have remembered. Million is the CapEx that we need for our network of assets to keep them in the proper shape. And after VERA 02/1960, we’ll go into that direction again. But for the years ’twenty five, ’twenty six, we will see additional 150,000,000 close to 150,000,000.
’twenty seven is the first year where the CapEx number should come down a bit. And the biggest portion of the additional CapEx requirement comes from VERA 02/1960. And that gives me the opportunity to tell you we are very good on track. We will deliver on budget and on time. So that means we will have see all the positive effects including 20% less cost of production by the end of twenty twenty seven.
Konstantin Wichard, Analyst, Baader Bank: Okay. So just that I get it clearly, where are you currently having the savings if you guide for our $550,000,000 CapEx, 400,000,000 base, 150,000,000 for Bera two thousand and sixty, and then no CapEx for the expansion in Bethune? Or where are the cost savings coming from?
Burkhard Lohr, CEO, K+S: No. I said the 150,000,000 is for Bera Two Thousand And Sixty and for Bethune. And the, by far, biggest portion out of the 150 is VARRA 2,060.
Konstantin Wichard, Analyst, Baader Bank: Okay. So it’s a bit lower than your initial CapEx expectation that you shared with us in 2022.
Burkhard Lohr, CEO, K+S: I think that’s what we say. But don’t forget about what we said and you understood that what I just said is are the correct numbers.
Konstantin Wichard, Analyst, Baader Bank: Okay. We keep it like that. And just clarification on your positive cash flow from inventory. Is that just due to prices? Or was there also some effect from reducing volumes?
Julia, Moderator/Host, K+S: You mean the effect that we were calling in the presentation for the EBITDA bridge for Q4?
Konstantin Wichard, Analyst, Baader Bank: I think you had a positive cash inflow from inventories. Was that solely due to lower prices, or was that also a reduction in inventory levels, volume wise?
Julia, Moderator/Host, K+S: It was a reduction in inventory levels, and that was, by the way, also an effect which on the full year basis was negatively affecting our EBITDA because we were drawing down inventories during 2024. And that was more volume than price, actually. We have a question from the room. Christian Faitz from Kepler.
Christian Freitz, Analyst, Kepler Cheuvreux: Can I ask on your environmental projects? Doctor. Loew, you mentioned spring will most likely not be achieved. What are the key reasons for that? Is there a change in government to Aurangia?
Or what’s behind that? And how is the tail pile covering whatever the term is going in Neuhausen and other locations?
Burkhard Lohr, CEO, K+S: Yes. First of all, we have roughly 300 environmental applications and approvals a year. So that’s ongoing business and that runs very smoothly. But this single one was a very tricky one. And here we had two states to agree.
So Thuringia is fine. They would be willing and able and ready to approve. But Hesse also has to approve because of of the underground deposit, which is close to that area which we wanted to flood. And they had an advisor, yeah, who we’re not 100% sure that there is no risk in really the number is corrected, I’m saying, in ten thousand years from now. And that was the reason for them not to approve.
And after Hesser did not approve, Thuringer born not able to approve because they both would have to approve. But that is really a very big, yeah, special situation. As I said, we have a lot of approvals to go for, and they are all in time and make sure that we can continue with our business. Faspringen was a special animal, and it’s unfortunate. It’s we were prepared meanwhile for that.
We can have alternatives to deal with our process waters, which again are much reduced after Varro twenty six. But Thuringia still has a problem with the sinkhole I understand sinkhole with the water inflow they have in this single area.
Christian Freitz, Analyst, Kepler Cheuvreux: So just to clarify, are you still maintaining the security of that mine and as such get money from Thuringia for the time being?
Burkhard Lohr, CEO, K+S: Or yeah. And that’s And that’s
Christian Freitz, Analyst, Kepler Cheuvreux: 20,000,000 per year or something.
Burkhard Lohr, CEO, K+S: Roughly, yeah. And that for eternity. So that’s a big issue for Thuringia. And we wanted to help them to mitigate it, so it’s unfortunate.
Julia, Moderator/Host, K+S: We have a follow-up from Arun Chatteralli from Berenberg.
Arun Teccarelli, Analyst, Berenberg: Hello. Hi. I have a couple of follow ups, please. The first one is on the FX. Can you please close what’s the sensitivity to changes in the Canadian dollar to Europe, please?
Burkhard Lohr, CEO, K+S: Sensitivity of FX.
CFO, K+S: Sensitivity, yes, we say if you have a decrease of around about 5% of the U. S. Dollar $0.05 0 point 0 5 dollars sorry, from $1.1 to $1.05, for example. Then we have an EBITDA effect of plus around about $16,000,000 because a stronger U. S.
Dollar is positive for us. In the other direction, if it you see a 1.15, for example, for the U. S. Dollar, then we have an EBITDA effect of roundabout minus million.
Arun Teccarelli, Analyst, Berenberg: Do you have exposure to Canadian dollar?
CFO, K+S: No. We are not selling in the Canadian market. So our products, we are selling to the international markets, to the S markets, and the rest of the world is mainly contracted in U. S. Dollar, in Europe and Europe.
We only have, yes, our costs personal cost, equipment cost, but it’s local. But that’s not a big effect for our EBITDA. That’s close to the US dollar.
Arun Teccarelli, Analyst, Berenberg: When you mentioned before that 50% of your gas consumption is hedged at 40 per megawatt hour, is this total gas consumption? Or is it just European or Germany?
CFO, K+S: That’s the European. That’s why I mentioned that we have totally hedged for the Canadian gas, but that’s not as volatile as in Europe. That’s pretty flat around a megawatt hour if you compare the Canadian gas level with the European, it’s a big difference. And that’s why we are so happy that we finally need with our solution mine. We are able to produce more than 2,000,000 tonnes with roundabout 500 people.
And we have some more gas consumption, but gas is pretty cheap in Canada. And that’s why we are pretty happy to have this mine.
Arun Teccarelli, Analyst, Berenberg: So the six zeros of megawatt hour in Canada compares to what level in 2024?
CFO, K+S: That’s pretty flat. But you don’t see this volatility in the Canadian market.
Julia, Moderator/Host, K+S: Are there yes, we have another question from the room. Axel Hellinghaus from Deutsche Bank.
Axel Hellinghaus, Analyst, Deutsche Bank: Yes. Thank you very much. How do you assess the stability of production in Russia if you take into account the politically desired prioritization of the arms industry? In In this context, how do you assess the Uracali’s latest maintenance announcement from mid February? Is this business as usual?
Or is this a first sign of neglected infrastructure perhaps?
Burkhard Lohr, CEO, K+S: Another good question. We had some insight into Russia and Belarus before the war because we always had some technicians over there. They were in our minds, and we shared some technical knowledge, but that ended all with the war. So I can only guess on that. But one thing is for sure, they were planning significant brownfield extensions, and they are not working on that.
I think money and technology and people are the issues. And even if the war should end, I think that will take long before they even think about these brownfield extensions again. That’s another reason why the market is in such good condition currently. And that’s true for both, for Belarus and for Welbeckali.
Christian Freitz, Analyst, Kepler Cheuvreux: Sorry? And Euroken.
Burkhard Lohr, CEO, K+S: And Euroken.
Julia, Moderator/Host, K+S: So last chance to raise your hand in Teams, but I don’t see any question in Teams anymore. Are there any questions from the room? No?
Burkhard Lohr, CEO, K+S: So as there are no more questions, I have some final remarks. That was my last dialogue with you all. I know there’s still a Q1 disclosure before I leave, but that will be made by my colleagues. I will supervise. But without joking, I always enjoyed the dialogue with the capital markets, with you especially.
You were always fair to us. Thank you very much for that, and please be as fair as you were to me, to Jens and Christian. Thank you very much, and
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