Earnings Call: Q4 2018

Mar 14, 2019

Hello, and welcome to the K And S conference call regarding the publication of the annual report 2018. Hosted by Doctor Burkhart Law, CEO. For the duration of the call, you will be on listen only. However, at the end of the call, you will have the opportunity to star 0 on your telephone keypad, and you will be connected to an operator. Please note on page 2 of the presentation, You will find the disclaimer. I'm now handing the call over to Doctor Burkhart Law to begin. Please go ahead. Thank you, operator. Ladies and gentlemen, welcome to our full year 2018 conference call. Let me start with some general thoughts on last year's performance. 2018 was a demanding year for us. We had to face extraordinary factors like the extreme drought in Germany. As a result, we were forced to temporarily stop production at our Barra potash plant in September and again at the end of the year. Just a few years ago, these interruptions would have caused earnings to slump dramatically. Today, however, KPLASS is stable enough that despite all headwinds, a slightly improved EBITDA can be reported. We made progress with our German production and met our Bethune related profitability targets. We added additional buffer capacities at our various sites and without our improved water management, we would have had working hard in becoming even more robust against weather related disruptions and to deliver on our shaping 2030 related promises. We are making progress and are on a very good track to achieving our targets. And now please open flight number 1. We have increased our group revenues by 11% and our EBITDA by 5%. A positive pricing environment, mainly in potash, but also increased volumes across all segments were quite supportive. Installed, we shipped more than 3,000,000 additional tons as a result of the harsh winter at the start of 2018. Furthermore, we increased our Canadian potash production and achieved 1,400,000 tons, which is almost half of the total capacity. Due to the drought, we had to stop production at our 3 Werra sites, which resulted in 64 outage days. Moreover, we were focused and forced to use additional shipments of saline wastewater for off-site disposal. On top of this, the unusual low water levels had a negative impact on trade rates, which increased substantially. Keeping in mind that already back interest in 2017, the potash edition had to carry a weather related EBITDA impact of about 1,000,000. The burden year on year was therefore additional 1,000,000. In absolute terms, the effect amounted to 1,000,000 in 'eighteen. Due to the significantly lower CapEx, our adjusted free cash flow improved by almost 50%. Adjusted for our outage days, net debt to EBITDA would have resulted in a multiple of 6.2. Our dividend proposal of per share implies payout ratio of 56 percent, which is slightly ahead of our guided range, but also reflects our optimism for 2019. Let us have a closer look at the market conditions in our potash business on Slide 4. Overall, last year's potash market was quite supportive. Global demand increased to a good 71,000,000 tons from our under 70,000,000 tons in 2017. At year's end, most producers were sold out into Q1 twenty nineteen, which also led to robust MOP pricing, especially in our overseas business. Please keep in mind that more than half of our revenues were generated in Europe, and with specialty products having a more resilient price development and have recently also started to pick up. Our average selling price for our potash and magnesium product portfolio of per tonne is therefore still lagging behind the described market environment. 5 to give you an update on our potash production. In 2018, we worked very hard to tackle our production challenges. However, adjusted for outage days in December, we missed our target by almost 100,000 tons in Q4. In total, we achieved an annual production of 7,500,000 tons. At our Werra mines, we had addressed all issues which caused last year's headwinds. And overall, product availability has already improved. Unfortunately, our Neuhof plan, the low roof stability reoccurred despite countermeasures installed in Q3. For safety reasons, we stopped mining in that sector, which is one of the 3 fields we are active. We are working on solutions to the other mining sectors, which takes time and effort. As a result, last year's production fell short of our initial planning by the above mentioned 100,000 tons and will also be burdened by additional 100,000 tons in 2019 year on year. Looking at the Thune production is continuously increasing. To further increase product quality, We are going to install a grinder pump in the first half of twenty nineteen and some cooling equipment in the second half of the year as discussed. On Slide 6, we would like to talk about the weather impact. I've already mentioned EBITDA effect of EUR 110,000,000. To improve the situation, we expanded our basin capacities by more than 10% about 600,000 cubic meters last year already and also expanded our logistics for off-site disposal. In early summer 2019, we intend to further expand our capacities to store saline wastewater underground on-site by up to 400,000 cubic meters. This will make us even more robust this year. The good message is: there is a high probability to have no weather related standstills in 2019. Let me give you an update This slide is already quite familiar to you. You can see we will get back the volumes lost by the weather related outage days and from our production issues at the parasite, which are now resolved. However, the performance of Our Neuhoff site also has an impact on this year's production. Nevertheless, we will regain about 500,000 tons of production in total. At Bethune, we are making good progress to meet our 2019 guidance of 1.7 to 1,900,000 tons as described, an increase of 300,000 to 500,000 tons. The closure of Ligmundshall will reduce our production in Germany by 600,000 tons, which, however, will have a small positive impact on our profits. All in all, we expect 7.7 to 7,900,000 tons of production in 2019. Cost of production should come down tangibly as we replaced high cost production by more profitable volumes from Bethune. Cash unit costs will stay above due to overall cost inflation update on Slide 8. In Salt, we saw a mixed picture. In the fourth quarter, the strong pre stocking in North America continued in October. The de icing business in November was a normal level, was at normal level, but December was below average. Demand for the icing salt in Europe was a bit low in the 4th quarter. In total, we saw a slightly increased the increase in de icing salt volumes year on year. Prices in the current season for de icing salt were up in Canada and the U. S. Midwest as well as in Europe. We continue to see a highly competitive environment at the U. S. East Coast. While in Europe, the wind free weather conditions at the beginning of 2019 caused a slightly above average demand for the icing salt, the business in North America was still a bit below our expectations, but sketched up in the last weeks However, in total, we are on schedule so far this year. Demand for our non de icing products is solid with increasing sales volumes. Now let's journal reporting structure on Slide 9. Based on what we have discussed when introducing our group, shaping 2030 strategy, we are working hard to break down silos and build 1 company. The implementation of our shaping 2030 strategy is advancing with visible results. In 2018, we started to make our administrative functions more efficient and focused on delivering customer value. Initial synergy effects have already been achieved in procurement, production, as well as sales and marketing. The reorganization is progressing well. From Q1 onwards This improvement will also be reflected in our external reporting with our 4 customer segments: agriculture, consumer industries and communities, we will provide further more customer oriented information. The 2 new operating units, Europe Plus And Americas are our reporting segment, are not IFRS. Let's discuss our outlook for 2019 on the following slide. Want to give you a better guidance already at this stage of the year. Therefore, we provide you with a range for our EBITDA today and not only in orders like we did in the past. EBITDA is expected to improve significantly to between 1000000 and 1000000. This forecast is based on an average euro, U. S. Dollar spot rate of 120. We see a good market environment for fertilizers. After the robust demand, We experienced in 2018, we expect global potash demand to remain at least stable. The positive environment of 2018 should therefore also favorably reach into 2019. We see a further increase of our Canadian production, and there is a high probability to have no weather related standstills in 2019. Riving cost inflation is likely to soften some positive effects from potash pricing. The adjusted free cash flow will improve significantly and turn positive in this year. This is the most important target for all of us, in the quarters to come. I'm fully convinced that we have every reason to be optimistic about our future. The management is keen to show our shareholders the huge potential we have here at K PlusF. Ladies and gentlemen, thank you very much for your attention. We are now happy to answer your questions. And like always, please, one at a time. Okay. As a reminder, we would like to ask more than one question please only submit one question at a time. Once answered, we will then move to your next question and you will be advised when to ask your question. Okay. So our first question comes in from the line of Michael Schafer calling from Commerzbank. Please go ahead. Hey, good morning gentlemen. Thanks for taking my two questions. I'll start with the first one. Coming back to your outlook statement for 2019, a rather broad range Maybe you can walk us through the sensitivity on the U. S. Dollar side. I mean, 120, if you would put this into mark to market, And related to this one, maybe also some hints what you have baked in in the lower end and the upper end of your guidance range? That's your first question. Let me share it to Austin even more. We have against this expectation, the FX at or when you take the FX at FX rate at 115, This could mean, variance of positive variance of about EUR 40,000,000. Then we have baked in, in the midpoint, the expectation of in what we call a normalized winter. So if we see in the pre demand and also in pricing, here, stronger or weaker numbers, which we cannot forecast yet for the fourth quarter. This would be one variance. Yeah, And, Tom, I mean, we don't know yet the, start of the fertilizer season. These are in Europe. Not in Brazil, hasn't started yet, really. And, what we also have baked in, and this is what you've seen. 1 of the charts book had presented a range for production we are expecting. And here, we said, especially for the fuel we see CHF 1,700,000 to CHF 1,900,000 and the one determines as part of the determination of the lower end of the range and the other one of the upper obviously. My second question would be on your free cash flow. You're targeting the positive free cash flow sort of turnaround there. I still see something like 600,000,000 CapEx in outlook for 2019 compared to something like in the north of 500 I recall, also, last year, you started with SEK 600,000,000 into 2018, basically, with kind of guidance. So maybe some changing moving and pieces here for the free cash flow turnaround and how conservative is your CapEx outlook? Yes, I mean, I would, 1st of all, call our expectation of the CapEx million realistic because this is what we expect from our bottom up planning. We have this year, tailing piles expansions, in Hatorf going on and, also, in, Zealand starting, in Vitacel as well. So this is where the improvement comes from. And then, I mean, what we have shown last year, where we also expected CHF 600,000,000 of CapEx. We have shown that if necessary, we can reduce the CapEx. This is of course nothing you would do from the beginning on because you want to invest in order to maintain either your site or expand them. But there's certainly some flexibility. And what we should keep in mind is we always look at the CapEx on the balance sheet. When you look into the cash CapEx, the cash CapEx was above 500, I think 5.13 or so. So the difference is not that big when you just look into the cash flow statement. Okay. Question comes in from the line of Christian Sites calling from Kepler. Please go ahead. Couple of questions. So first question surrounding your ongoing production issues. Can you put a bit meat to the bone on, what's going on in Ryhoof and also, the lower K2O content in enterprise stuff. And, related to that, part advice, why do you still have taking issues in in Bethune? Okay. Let's start with the German site, that we are running through an area with a lower K2O content as previously expected that we have reported in intervals, but we have reported last year. And we have already indicated that we will see effects of that in 2019 as well. We should be through that area and we know that we get a higher content in K2 content after we are done. And so in 2020, we are hopeful to see a positive turnaround of the situation. The last remaining bigger issue is at the at the Noyof plant where we have still not fixed the situation with our roof stability. We thought we could fix it with a with another anchor situation, stronger, longer, but that's didn't work. We have really an extraordinary geologics here in this area. And now we believe the solution will be to narrow the space between the piles, the pillars and that, requires a lot of pre work and adjustments. And that's why we believe we will be able do so and go back into that area, which by the way has a higher KCO content. That's why we want desperately find a solution for it, but, that will be most probably not done before the end of this year. That's why we have decided to take out the additional 200,000 tons. So if you take 2018 2019, we'll lose 200,000 tons compared to our original plans for Norgeville, but it is all baked into our guidance. On that, if I may, just quickly ask on on that one. More narrow mining also means, higher costs. Right? Once we are once we are we have prepared that the costs is not significantly higher, but we will take out less out of this area. And it's a more, there's a higher consequence That means we cannot, mine all the volumes that we would have liked to mine in this area, but that has no effect, immediate effect. And the higher cost is not meaningful. Coming back to Bethune, that was your last part of the first question, there's no surprise. We indicated to have the perfect quality we need to install this grinder pump that will happen pretty soon. And at the end of the day, we need to have this this cooling facilities, and that will be installed by the end of the year. And we see now in the cold period, it worked better. But there will be a summer, of course, to come without this cooling facility, and that's why we have model this effect that we most probably will see into the volume expectation for 2019. Okay. Thank you. Then, second, question, to us to mention, it's too early to, to, touch fertilizer demand in in Europe. I mean, walking the dog, I saw it with my own eyes, fertilizer being nicely applied in in in Europe already. In the region here. So I mean, what are the early indications of demand in Europe? Do you have any feedback from your salespeople? The same that you have seen, obviously, Europe is picking up nicely. Earlier than last year, you might remember, we had a very long winter year, and we made our de icing volumes in March in last year. So no reason to be, concerned But of course, Tawson is right. We need to see, the development of the whole year and, of course, in all areas, That's why we are it's only March, and that's why we have a range of 1,000,000. You know, we have so many moving parts but we are quite confident to stay in this range for the reminder of the year. Okay. Thank you very much. Welcome. The next question comes in from the line of Neil Tyler calling from Redburn. Please go ahead. Hi, Neil. Is your line muted? Oh, thank you pardon. Sorry. Couple from me, please. I'd like to touch again on the potash production in Germany. The 200,000 tons that you have effectively removed from the 2019 guidance, is it sensible to assume that that recovery, volume recovery should materialize in full in 2020 or sort of phased out of 2021? I'd really like your thoughts on the longer term volume outlook for Germany. You know, is is 6,000,000 tons the right number to think about the long term or or, you know, do you see that on a on a either increasing or declining? Trajectory? Yes, first of all, yes, if everything works out fine, we should see additional 200,000 tons in 2020 already, but I have to remark, maybe it's only 150, 120 or whatever because that is still a plan to tackle the problems in Neuhof, and we it remains to be seen whether we are able to do it, but we are quite hopeful. And there's another, project running, which will have a positive impact. That is our operational excellence project. We that's one of our synergy projects. You know, that we indicated we want to improve our EBITDA by at least EUR 150,000,000 by the end of 2020. And the biggest portion comes from operational excellence. We have, around 1000 measures to improve our work on sites. And some of them are cost cutting measures and some of them are some meaningful measures to increase the throughput. So we might see that it's too early to to raise numbers, but we might see an impact, a positive impact on the German production out of operational excellence. At least we will report more on that in the course of this year. Okay, thank you. Secondly, Second question on CapEx again. The, obviously, the 2 investments that you mentioned in Bethune Can you perhaps offer a bit of, some scope for magnitude of those? And am I just interpreting the, the message from Torsten there on CapEx that, at the low end of the EBITDA guidance range, you'd probably crank back the CapEx in order to be able to hit the free cash flow target. Is that is that the way to sort of think about the various moving parts? No, 1st of all, we have, of the measures that we take in Bethune, fully back in into the 1,000,000. And we are not talking about meaningful volumes a mid sized double digit Canadian dollar amount for both together. And some of that is compensated by the budget Bethune has any way for their CapEx requirements. And second part of the question, we have shown some flexibility without having negative impact that is important, on our running business, to steer our CapEx. And if needed, we would also do that for for in 2019. But our guidance, we will have a positive, a slight positive free cash flow even at the lower end, it's assuming 600,000,000 CapEx. Okay. That's clear. The next question comes from the line of Patrick Rafreys calling from UBS. Please go ahead. Good morning. Thank you for taking my questions. The first one would be on Bethune and the secondary mining that should start at one point during 2019. You said in the past that you'd expect something between 102,001,000 tons to be added in 2019. Is that still a valid guidance, and can you Can you already say when exactly the startup will be? Yes. Thanks for that question. We have started last year already. No big volumes, but, we have started the process and we have seen it works. And that's why we are very sure to be able to deliver the 1 to 200,000 trans secondary mining. And as you know, that is very low cost production, and we are very happy to see that ramping up now. And following up on this, your cash on a cost guidance for over 200, due to cost inflation. Could that change if the secondary mining comes in at the upper end? So a 200,000 tons, or is that independent of this? Now, 1st of all, I would like to use the opportunity to indicate that, Bethune with only 50% of the capacity has, has a cost per ton number, which is below our German numbers. So it has already a positive impact. So it indicates what is ahead of us in the future. But the 100,000 if we talk about the upper end, the 100,000 tonne secondary mining at the upper end not big enough to really turn the needle. And then another question, on the salt business, and I realized it's very early days and March is still in full swing. But do you have already any And do you want on how channel inventories might evolve into the next, contract season later this year? Yes. Here, we always have to differentiate between the different areas. And we talk about Canada, Midwest, East Coast and Europe. In total, we can say already that we will be very close to our expectations for the first year as well. And we go out of the season with the normal to low inventory. So we are quite positive for the next bidding season. East Coast was above our expectations. So here, we will see competition in the next bidding season, but Midwest has changed significantly. We have sold our entire stocks So we are out of inventories and we believe that will be the same for the rest for our competitors and for our customers. So that should show a nice development in the bidding season. And Europe was on average. So here, In total, we are happy with the first quarter and we are positive for the bidding season to come. Okay. Thanks. Thanks very clear. Then one last question on your new reporting structure, with Europe Plus, will you still be showing, potash numbers separately within that segment? Or will it all be mixed up if the euro absorb business? We will show, potash agricultural potash numbers. So it's even more transparent for you because we show which which is what is the development of potash, which goes into our customer segment or is sold in our customer segment agriculture. And the rest is, is industries. So we in the past, we have already always blended these numbers, although we have completely different customers and partially the dynamics are different. That is a good news for you. The next question comes in from the line of Thomas Rugglesworth calling from Citi. Please go ahead. Good morning, gentlemen. Thank you very much. My first question is you've said that ASPs will be modest moderately up for 2019 in your guidance. Could you help me understand how you're thinking about the specialty component within those ASPs versus the kind of commodity component outlook that you see for for 2019. Yes. Usually, the specialties are following with the time lag, and that is the case this time as well. When we have seen, strong increased MOP prices in Brazil, for example, the SOP prices still were flat But at the end of last year, we have seen some recovery and people believe, this is a sustainable development. So when I may add something here, we hear a lot about reduced or, reduced to 0 China export tax. I think we should we should think in this context, this is this is not going in our core markets. Our core markets are Europe, a little bit of Middle East and America. And, some of these markets, we certainly meet Chinese potash, in Belize, for example, that we our salespeople don't believe that there are major disruptions on the pricing to expect because the volumes overall are not really big at this time. Thank you, Dawson. That actually anticipates my second question. So just as a, as a follow-up, just a just a a housekeeping one, exceptional costs or, that we should be expecting for 2019, or, can can you give any guidance on on those? Doing overall cost per ton? Or No. No. Just exceptional, kind of, in terms of the, obviously, you've got the cost saving, the, you know, the 2030 plan cost savings. You've got, maybe other costs that might become exceptional through the course of the year. Outside, I'm not looking, you know, obviously, weather related, you know, not about the Where River. I'm just talking about other exceptional costs that we should be factoring in. Okay. Yes, of course, together with our shaping 2030 initiative, I mentioned one positive effect But there are, of course, extraordinary effects. We indicated last year already that we will cut our workforce in the administrative areas by 10%. And it will not work without any measures like that in the production area. So we will have some redundancy costs But in total, we expect, higher savings out of these measures in this year already than costs. It's not a big delta, but it's a positive slight positive impact. Besides that, we have no extra ordinary burdens. Okay. And, is that gonna be low double digit for a number then for these these costs? Yes. The costs, no, we would rather like to talk about the net effect. And that is the total digit number, yes. Okay. Okay, brilliant. Thank you both very much. Thank you. Question comes in from the line of Thomas Loboda calling from Societe Generale. Please go ahead. Yes. Good morning, gentlemen. I think I still have 3 if, if I may. Firstly, on on free cash flow, you have provided us a quite detailed guidance on EBITDA. Would you mind providing us a range on free cash flow if you can. And do do you ex should we expect a normalized cash flow, or or do you see any funny to either through the positive or through the negative side in 2019. Yes, Thomas, we don't want to give more guidance or more ranges out than that for the EBITDA, but, I mean, we gave you already the hint that even with the, EBITDA, at around 700, we still see a slight positive free cash flow. We're not gonna not gonna we're not gonna be more precise on this. With regard to any funnies, in this year's numbers, I wouldn't expect those. I mean, we had last year a slightly higher cash taxes. We had tax audits where we pay taxes afterwards. So we expect cash taxes to go down. We see a normal tax rate. We certainly see a slightly higher financial results, but this is all the impact, we see. So it's net positive. So also also the cash flow improves with the EBITDA. If I may add maybe one more hint, slightly positive means not much more than breakeven. That's fine. Thank you. The second my second question is on Bethune as think in the past, you were saying that the fuel should turn EBIT positive in 2019. I haven't seen a confirmation of that in in your written statements today. Am I mistaken, or is there any change to the profitability at this unit 2019 versus previous expectations? Now when you get the confirmation now, we expect EBIT positive for this year. It's change in the setup because we are behind our original ramp up curve for the reasons we have discussed. So lower volumes, but higher prices and that ends in the same, EBIT number. So we are positive. Right. Perfect. And my last question, is on the, IFRS 16 effect. Could you, could you give us a hint, what is it on EBITDA and on free cash flow for 2019, please? We see a positive impact on both metrics, of a low double digit number. Low double digits. Perfect. Thank you. And, Thomas, if I may add that, we're not talking about it, but we started investigation study to talk about this certainly half a year ago. So I would assume that, most people have anticipated this. No worries. Thanks. Thank you. The next question comes in from the line of Markus Mayer, calling from Baader. How sir. Please go ahead. Hello. Good morning, gentlemen. I have several questions on the benefit and to kind of basically done with your support in pitch for 2019. Firstly, on the, currency sensitivity, Marcus? Yeah. You're very hard to understand. Is this not better? If you say something, we can judge. Yeah. Okay. First of all, first of all, first of all, but we tried we tried. Okay. Okay. I'll I'll try to speak up. Sorry for the bad luck. 30 on the, you know, 20 sensitivity. I'm a little bit puzzled on this only 40,000,000 input at the 5, US dollar exchange, because normally this was higher. Could you update us on on the that's what you have and what would be the sensitivity if the, the extension would go to 125 or down to one can, that would be my first question. Yeah. Marcus, the sensitivity didn't change much, I would say. It was higher because in the past, we were always talking about the difference 10¢. I think this is maybe what you have in mind. Secondly, so what we also need see is we had a time where the dollar was above $1.20 close to $1.25 or even above that. And we have a rolling hedging, hedging policy. Which means we have also, bought at times with a higher U. S. Dollar, our hedges, And we have this in the backup of our compendium. You see that the best case for 2019 is 1.16 So this limits a little bit, compared to the unhedged components. And, yeah, we have hedged up to 85% of the 2019 exposure. So this expanded, I guess. Okay. Second question is on the, the production stops. Vehicle deliver a a refund. You had 110,000,000 effect last year. Should we put this year expect basically lower set or previously things you said you should expect, a return of roughly 70,000,000. What what is now a good number to take into account? Yes, there will definitely be a transport of waters. And we said we have cost up to per cubic meters. And, that is a tricky situation every year. Even with low with empty basins, do we start shipping volumes to make sure, to make very sure that we get along with our stencils over the summer. Or don't we start, the solution will maybe be in the middle to start with low volumes, but make a long story short, we will have transportation costs, which could end in number of last year's number. That would be the high end 40,000,000. So would you then have the net, effect of 70? Okay. Okay. Good. Makes sense. Second question, on this list and the logistical costs. So, should we assume then also for the 2018 2019 bridge, additional logistic costs. So, we've been seeing if it's a negative. Are you, 18,000,000 irailages because in 2019? So when we talked about freight costs, we always differentiate it between this special situation in Germany due to the drought that was not only affecting us, but allied companies with higher freight costs for freight over the rivers due to the low river levels. That is something which most probably will not occur one more time. But the freight costs, in America, and here we are shipping the big volumes. That is the new normal we should we cannot even rule out that we will see higher costs than last year in 2019. Okay. Okay. Understood. And this one of the effects, keeps together, can you, can I have a neck and teeth for this effect? You're not discriminating? In terms of freight? Yeah. In terms of freight. Or if you include it in this 110, uh,000,000 effect, That is included in the one hand. So one hand is lower production is, transportation and higher freight costs. Okay. I see. I see. Okay. And then, you have 10,000,000 roughly a closure cost for shipment size in 2012, I think, at the beginning of any more any costs related to shipping time in 2019. So I I think that this is There's a big bridge or something I can add basically through 2019. Is this correct? Yeah. We have of course, a bit provision for everything we have to do now. And maybe we will find out we have cost overrun or a 1,000,000 or whatever, but nothing meaningful. Okay. Okay. And then regarding the net cost savings, you had a lot of time. I've already just been charged in there with the the costs and the with the the efficiency measures. What if it's a a low single digit number, you should take in from the Netquest 7 2019, or if it's already a double digit number. Yeah. The low double digit number is the difference between the savings and the costs. So a net if you have a low double digit number as a net effect out of these measures. Okay. And then the last question, thank you for for this communication. What is, a fair assumption in terms of higher personnel costs to take them for for the group, 3% or is more on the 5% range? More on the 3% range. Okay. Thank you so much. Ship to our social partners. Okay. See you in good evening. Yes. Thank you. Thank you. The next question comes from the line of Knuttinger calling from Pareto Securities. Please go ahead. Yes. Thank you for taking my question. Coming back to the FX is you. So just in order to make clear that I understand it correctly, you already have 85% of your US dollar exposure at 120. Is that correct? So our policy is always to have that in order of the previous year. So in these days, in the autumn of 2018, to be hedged up to 80 percent of our net U. S. Dollar exposure we're expecting for the following year. This means for the year 2019, yes, we have and we are talking about potash only here, right? So we do not hedge our salt business because it's translation only. So from the potash net, exposure to the U. S. Dollar, we're hedging 85%. And we do this with, in Acola structure, which limits our best case based on this 85% to 116. The next question comes in from the line of David Simmons calling from JP Morgan. Please go ahead. Yeah, hi. It's Chetan Udeshi, actually, on the call. Just two first question was on clarification. Did you say IFRS 16 will also help the free cash flow because I thought, you would have taken into account the the the move from cash flow from operations into financing. So when you say slight positive, that includes the IFRS benefit as well. That's the first question. And the second question is question can I answer this question right away? Yes, we said, so the low double digit million positive effects has also an effect on the cash flow. Okay. Fine. And that's just because some of the, cost or cash out is now probably moving to cash flows on financing lines. So that's how the cash could be. More or less. Okay. And the second question was, maybe just, looking into mid to long term, can you give us some color on how you think the CapEx requirement for the business looks like? And the crux of the question, again, to put it simply is, the leverage is still pretty high at this point, even if you take your twenty 2019 guidance, which assumes no outages. The potash prices have already improved, quite year over the last couple of years. So the question is where do you see yourself comfortable in terms of the leverage of the business going forward? And how how should we think about the trajectory from from here on, assuming no unexpected outages? Okay. Let's start with the first part of your question. So the run rate, the normal run rate for the business, FX number would be 1,000,000, but we have now, for a couple of years, additional 1,000,000 for environmental Thomas mentioned already with one of his answers that we have the heap extensions we started last year with Adorf Now we are running into Silid into, into, Vintas hire, that's bad luck that we have freed extensions in a row. And they are very expensive, but then we are done for many, many years in terms of feedback extensions. And the second part of your question, we have indicated, leverage we want to be we want to have it by 2020 coming from 8.1 times in the middle of 2017 when we gave that guidance. And we want to be back in back to be an investment grade rated company by 2023. And that is, one of our most important indicators, the management is taking into account with all his decisions. Thank you. The next question comes in from the line of Chris Ryan calling from Bank of America. Please go ahead. Hi. Yes. Thank you for taking my questions. Just on the first one, and apologies. My phone dropped out for a minute. So if I missed it, What was driving the increase in the non de icing volumes in Q4? It's a it seems like a fairly steady business in in this quarter was kind of an uptick. So could you give more color on what geography or end market that was going to entail? Yeah. And what we have seen, was a strong demand in North American markets for, I would almost call it specialty. So it's in the consumer business. Think about Pink Himalayan, think about kosher salt. So that's what our specialties are for us. So it's not the commodity like the the round can, you know, We have also seen, a pretty good we talk about small volumes, but that's driving it and with good margins. We have also seen, for example, in the copper leaching business, and as we always told, the markets and increasing demand, We are selling sold into copper leaching processes, and this is a business, which is growing nicely actually. Got it. Thank you. And then, just on the caking issues at Bethune, does this pose a downside risk to volumes. And that, I mean, if all goes to well or if all goes to plan, putting the grinder pump and the cooling equipment in 2019, Does that mean that there would be upside to the between volumes or, you know, what what is the guidance kind of assuming for the caking issues? The guidance is that we will see including our issues, which will be more intense in summer this year. We expect 1,700,000 to 1,900,000 tons to produce. And that is everything is modeled in And once we are done, and that should be the case by the end of this year, that will have, of course, a positive impact on the ramp up in 2020. But we should not expect extra anything extraordinary, which could lead to a higher production than 1.9 and we are not expecting to fall short to the 1.7. Okay. Got it. And then, just a question on the promise or for 2019, there's some that I'm trying. What's the expectation there? Will those be refinanced or is, debt repayment? Gonna do a priority. Yeah. 1st of all, first of all, we're gonna pay them back. Oh, yeah. And secondly, yeah, we we're gonna refinance those, somehow because, the the free cash flow would not be enough in order to, refinance them. So, we have, also room to maneuver in our credit line. So, we haven't yet made up our mind how to refinance them, so with which instrument, but that's what will happen. The next question comes in from the line of Saliq Suro calling from Pictact. Please go ahead. Yeah. Good morning. Could you walk us, to towards your potential production in 2020. I understand that 2019 will still be a year of, kind of ramp up. And I'd like to get a feeling about, where you're heading so so if I understand, well, Germany should be back to 6,100,000. And how should we, kind of Amision, Bethune, and, and it's, it's, especially the ramp up of the secondary mining in 2020. And the second question is on the Sorry. Sorry. We said 1 by 1. And as we adjust, this is the 2018 full year call. And we give a guide for 2019, yes, early to give you more precise, guidance on production for 2020. All we can tell you is we will see a higher volume in the German potash production and the ramp up will continue in Bethune with higher volumes there, but no numbers, sorry for that. Okay. Could you maybe, remind us what's your expectation of total capacity for bitumen. And and what's the time frame maybe, maybe to to to reach out? The The total capacity and the time when we want to reach it is unchanged. It's 2,860,000 tons. And we should achieve that by the end of 2023. Could we imagine that it could be a linear ramp up until then? Is it a good assumption? At least it's not wrong. Okay. And then just, if you can I'm a bit confused on the hedging. You said your 85% edge at 116. If I assume the the the kind of, spot price for the remaining percent. It will be closer to 115 for the full year, which been the the 40,000,000 you mentioned as an impact for, dollar, potential dollar at 1.15. That's the 120. You have your your guidance. It should actually be in the back. Am I wrong? Frankly, I don't know what you mean with being in back, but This is the the hedging policy I elaborated on. This is why I made it clear, when I answered the market's question, is valid for our potash business. So it's about half of our business. Right? The 40,000,000 also includes our salt business, which has a translation effect, but which we do not hatch. I think I got to what you mean with, in the back, you mean it's a high probability that we can, again, the 40,000,000 I would agree for the first quarter because it's almost done, but we have seen so many tremendous changes. Let let something be solved with a Brexit or between China and the U. S. That can have significant impacts in both ways. That's why we and when we put the plan together, it was October last year, there we had more different environment and we put that we took a number for 3 years because our midterm planning is 'nineteen, 'twenty, 'twenty one. So I think we It's a good advice for us to stick, with a 120 for the time being. Yes. Thank you. The next question comes in from the line of Markus Schmidt calling from ODDO BHS. Please go ahead. Yes, good morning. Thanks for taking my question. I have just one could you maybe just comment on new volumes coming from competitors in the medium term? I think you referred already to Chice competitors, but I think you can, was topic in the last calls and, VHV comment recently on the on the Janssen plant and the long term plans there. Joe, just to mention some names here. So maybe, my question is actually how you assess possible negative price impacts in the next few few years from you volumes coming to market? It's always difficult to comment on the extension plans of competitors, but I would like to give you an indication. I'm pretty relaxed about this topic. Yes, there are 2 projects being ramped up from EuroChem. We have seen the first volumes after many delays. Last year, it was about 400,000 tons. We don't expect that there is, very much to come from the 1 mine and I always mix up the names. So I only talk about the 1 and the other mine. And the other mine will not deliver into the world markets. At least this year. Jensen is, it's if ever so far away, and we are talking about completely different world's demand, what what is important to take into account, we have seen a huge increase in demand over the last years. And everybody was arguing once you come on stream with Bethune that will, that will nail the prices. Exactly the opposite was true. We started producing and the prices started rocketing. So the market can easily cover, meaning, additional volumes if they are not too big. And I'm not seeing any high volumes and the new volumes enter in the market. And also, you also have to take into account if you see a list of of projects, lot of them are substitutes for, lost capacities. Either way, this is a case in our case as well. Yes, we had higher volumes with, Bethune, but we have closed And, the net there is only additional, when we have fully ramped it up, additional 2, something,000,000 from Brazil. And that was over a time period of 10 years. So all in all, I'm quite relaxed. Okay. Very clear. Thank you very much. Thank you. So I hear that this was the last question now, and I would like to the opportunity to thank you very much for your interesting questions. We are looking very forward to seeing you again, and Tara and I will be on the road. Next couple of days, Frankfurt and London, maybe we see one of the other of you. Thank you for listening and goodbye. Bye. Thank you. That will conclude today's conference. Thank you for your participation. Have a pleasant day, and you may now disconnect your handset.