Welcome to the K+S conference call regarding the publication of the financial report Q3 2018, hosted by Dr. Burkhard Lohr, CEO. For the duration of the call, you'll be on listen only. However, at the end of the call, you'll have the opportunity to ask questions. If you need assistance at any time, you can press star zero on your telephone keypad and you'll be connected to an operator. Please note on page two of the presentation, you'll find the disclaimer. I am now handing the call over to Dr. Burkhard Lohr to begin. Please go ahead. Thank you.
Thank you, operator. Ladies and gentlemen, welcome to our third quarter conference call. Q3 was a challenging quarter for us. Although the market environment remains supportive and our production in Bethune is nicely improving, we were hit by the extreme drought. Nevertheless, the performance in Germany we discussed last time is showing first signs of improvement. Let's have a closer look on this and the implications for the remaining months in 2018. After a brief presentation, the team here in Kassel will be happy to take your questions. Let's start with the highlights of the third quarter on slide three. Let me start with some positive highlights. Our revenues rose again year-over-year and quarter-over-quarter. In potash, this was due to higher pricing, mainly in overseas MOP markets and a further increase of our Canadian production.
The ramp-up of Bethune is making good progress, and quality as well as quantity have again improved. In salt, the North American de-icing business benefited from a strong pre-stocking. Compared to last year, we increased the volume of de-icing salt by more than 500,000 tons. However, this overall positive development was overshadowed by the severe and ongoing drought in Germany. We stopped production of two of our three Werra sites, which resulted in more than 50 outage days. Moreover, we were forced to use additional shipments of saline wastewaters for off-site disposal, and the unusual low water levels increased freight rates substantially. All in all, the potash division had to absorb a weather-related burden of about EUR 80 million. Furthermore, salt earnings show a EUR 15 million freight cost headwind. As a result, group EBITDA decreased to EUR 36 million.
Nevertheless, on the back of significantly lower CapEx, our adjusted free cash flow showed encouraging improvement. Let us have a closer look at the market conditions in our potash and salt businesses on slide four. Overall, the potash market remains supportive. Demand is solid and many producers are already fully committed into 2019, which is also reflected in current pricing. This is especially relevant for our overseas MOP markets. Please remember, two-thirds of our revenues were generated in Europe and with specialty products. Here, prices are more stable and lagging behind the positive price momentum in overseas MOP markets. In salt, we do see a mixed picture, even though positive in total. After the bidding season in the de-icing business has come to an end, demand seems to be strong in the U.S. Midwest region. Demand in Europe and Canada looks slightly improved ahead of the upcoming winter.
However, after a mild winter in the U.S. East Coast, pre-stocking in this region is shy and competition remains tough. Overall, market conditions for our non-de-icing businesses are intact. Bottom line, after the first nine months, potash prices have moved into the right direction, but overall, rising cost inflation needs our attention. For example, freight costs increased price related by more than 5% in the first nine months compared to last year. Even on a group level, we expect an increasing trend for the quarters to come. Let's move to slide five to give you an update on our production performance. In our last call, we provided you with a lot of insight into the German production. As expected, the performance at our Werra mine has started to improve in the last quarter.
The lack of employees and our illness rate improved, and our machinery and equipment was partially replaced. At our Neuendorf plant, the loss of production was similar to the second quarter. Nevertheless, the issues are under control now as we have installed most of the new production technologies by the end of Q3 2018. Looking at Bethune, we are able to increase production quarter-over-quarter, and this positive trend continued in the fourth quarter as we reached in October a new production record. On top of that, the seasonally lower temperatures helped to cool down our product easier. In addition, in Q4, we are going to install a temporary grinder pump. Both effects should further increase our output. All in all, we took very high efforts to tackle our production issues. On slide six, we would like to talk about the very unusual weather situation here in Germany.
Due to the severe drought in Germany, we had to stop our Werra production at Wintershall and Hattorf in September. To improve the situation, we have further expanded our basin capacity by more than 10% to about 600,000 m³ , and also stretched our logistics for off-site disposal to a new limit. Therefore, we are able to restart the production by the end of September. Just as a reminder, without the additional measures we have implemented already last year, we would have to have stopped production back in June. Very important is to look into 2019. In 2019, we will further significantly expand our capacity to store tailing wastewater on-site, and that will make us even more robust next summer. Nevertheless, water levels in Germany remain extraordinarily low. The rainfall has been seen so far in the final quarters is clearly below the five-year average.
Due to all our countermeasures, we have now secured production to the beginning of December. Nevertheless, we cannot exclude additional outage days until the end of 2018. In any case, we do expect further extensive shipments of tailing wastewater for off-site disposal in Q4. On top of that, inland shipping is increasingly impacted by low water levels and causing overall higher logistic costs across the group. What does that all mean to our full year 2018 guidance? Therefore, please turn to slide seven. Overall demand in potash remains robust, and we expect a positive impact on pricing on our full-year EBITDA. Increasing profitability of our Bethune mine and tangibly higher salt volumes will also help the situation. However, the production issues at our German mines, FX development, and Shaping 2030 related costs will negatively affect our full-year results.
The outage days in Q3, extensive off-site disposal on the back of the ongoing drought, and inflated logistics costs will reduce this year's EBITDA. We expect additional wastewater volumes and related freight rates having an impact of up to EUR 20 million in Q4. Bottom line, we are reducing our EBITDA guidance to EUR 570 million-EUR 630 million. This year's cash unit cost in potash is now expected to be around EUR 215 per ton. Excluding the weather-related outages in Q3, we would have been well in line with our previously guided range of EUR 205-EUR 210 per ton. Potential additional outage days in December are not part of our full-year EBITDA guidance. The upper and lower end of our guided EBITDA range is mainly determined by the weather situation in Q4, both for the de-icing business as well as for river water levels and the implied logistics costs.
The adjusted free cash flow should improve significantly compared to 2017, mainly on the back of lower CapEx. Finally, let me give you a first rough idea about 2019. Please move to slide eight. We have done our homework with respect to our several production issues. From next year on, our Operations Excellence Program will further increase our productivity to stop the impact of declining K2O content in Germany beyond 2019. At Bethune, we are making good progress to meet our 2019 guidance of 1.7 million-1.9 million tons, an increase of 300,000-500,000 tons. Altogether, 2019 should show a much better operational performance. Nevertheless, this year's outage days had a negative impact on our Werra volume of about 200,000 tons. Including the operational improvements, we expect an increase of our Werra and magnesium production by more than 500,000 tons in 2019.
The closure of Siegmundshall will reduce our next year's production in Germany by 600,000 tons, which however, will have a positive impact on our profit. Cost of production should come down tangibly. Still, cash unit costs will stay above EUR 200 due to overall cost inflation. All in all, we confirm our targets being free cash flow positive in 2019 on the back of improving operations, CapEx discipline, and our working capital management. Ladies and gentlemen, thank you very much for your attention. We are now happy to answer your question, and as usual, please one by one.
Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you change your mind and wish to withdraw your question, please press star two. If you would like to ask more than one question, please submit one question at a time. Once answered, we will move to your next question. You will be advised when to go ahead. The first question comes from the line of Michael Schaefer from Commerzbank. Please go ahead.
Yeah. Good morning, gentlemen. Thanks for taking my two questions. First one is on logistics costs. You talked a lot about this one also in the second quarter. Also with the outlook you provided for the fourth quarter, I wonder whether you can provide us some quantification on the overall logistics bill increase you are facing in 2018 and maybe a bit of split into P&M and salt. This would be my first question.
Yeah. Thank you, Mr. Schaefer, for that question. I think I mentioned that we had additional costs in Q3 alone of EUR 15 million. The year started with higher logistics costs in the U.S. in the salt business. I remember that we were talking about 15% compared previous year. I think that was the number in Q4. That has also slightly increased further in the following quarters, in the second and the third quarter. Now we have this extraordinary situation here in Germany, as you are located in Germany as well, you should be well aware about that. The ships can only load a quarter of the normal load. That means freight costs concerning the river transportation partially is four times the bill it was in the past. That is not sustainable, I think. Once we have normal river levels again, that should come back.
We have taken into account with our guidance, a significantly higher freight cost number in Q4 than what we have seen in the year before.
This is done basically evenly split between P&M and salt, or how should I think about this one?
P&M?
Potash.
I'm coming.
Michael, you have on the one hand, the brine transportation in Germany, which mostly affects Potash.
Right.
The lower river levels when we want to bring the salt product to the customers, plus we have still the issue with the truck drivers shortage in the U.S. My gut feeling is it's a 50/50 split of the higher logistics cost.
Okay, thanks. My second question is somewhat related to this one. You talked about 2019, that you significantly have increased your on-site storage capacity. I wonder from this logistics bill you're facing in 2018 with all the outages, et cetera, what should we think about the relief potential from having all those measures on a kind of normal precipitation and water flow levels at Werra? Stripping out all those outage-related costs. Which part basically is recoverable from this perspective heading into 2019?
I talked about a significant increase of storage capacities for saline wastewaters in the Werra area. The 600,000 m³ I mentioned for the basin capacity we have in hand already, although it's quite full. We will have additional 400,000 m³ temporary storage capacities in an old mine in the Werra area, and that means that we in total have 1 million m³ . Assuming that we get these basins empty again, we have 1 million m³ , and that should be good for a very dry summer. We are a little bit more relaxed for the future concerning the risk having standstills and the impacts. When we come up with a guidance for 2019, we rather have not the assumption that we have further standstills, but transportation costs for waters. Is that what you were asking for?
It sounds like at least that's a fair assumption, that those kind of additional transportation costs to get rid of the wastewater, that this type of costs are gone basically by 2019 from-
No, not totally because there is some obligation for us to bring waters to the offshore mines like Bergmannssegen-Hugo and Hugo and most probably next year as well as the Herfa-Neurode, which are available for us in this extraordinary situation, and we cannot just not bring any waters into these mines if we don't need it. There will be some transportation costs, but of course, on a very much lower level than we have seen in 2018.
Okay. Thank you.
You're welcome.
The next question comes from the line of Diogo Silva from ATEO. Please go ahead. Diogo, your line is now open. Please go ahead with your question. Could you please check if your line is muted? We've got no response from Diogo Silva.
Hi. Sorry. Can you hear me?
Go ahead.
Sorry.
No. Now we can hear you.
Thanks. Thanks so much for taking the time to answer my questions. I guess I have three main ones, but let's do them one by one. The first one is more related with the current situation of your potash production in Germany. You had mentioned when you reopened the site in Werra that you didn't expect any more production outages in 2018. Now in this presentation, because the water volumes remain very low, you have kind of opened the possibility that there may be more production outages. Even though I understand it's completely a non-controllable factor, I would just welcome a bit more transparency, which in terms of if the precipitation level remains at the current volume, my understanding is you're not able to put enough water into the river, comparing with what you produce.
How much longer will it take, or how long can you extend without having a production outage? That's just basically my first question.
Okay. First of all, I think, I hope that everybody understands that to predict weather effects on our production is a very difficult thing. We always have to work with assumptions. As I mentioned earlier, we have now 600,000 m³ of storage pond capacity available. As we had no heavy rainfall, and the Werra is showing roughly six, 7 m³ a second river flow, but we need 30 in a normal situation. That means that we have to bring a lot of our production saline waters into this pond. Once the ponds are full and the river has still a low level, we have to shut down production. Assuming that we have no change in the current situation, we are able to continue with our current available pond volumes until the beginning of December. Then it.
Okay, that is.
It depends on, will it rain in December? Will we have only a couple of days standstill or a longer period? I easily cannot tell you. That's why we have to exclude that from our guidance.
No, I appreciate that, but that's exactly the kind of information that I say I was looking for.
Okay.
The second question I have is just a more long-term view on this mine. Again, just for me to understand a bit better how the company is thinking about it. My understanding is that from 2021, roughly every year now you are having smaller or bigger problems, so it just feels to me that there is not a lot of buffer. I understand that the weather conditions were dramatic, there is not a lot of buffer. My understanding as well is that from 2021, you have to stop doing the deep well injection, and that also from 2021, your current agreement with the Regierungspräsidium, is that you have to drop the salinity content of the water by about 33%. In my numbers, which may be wrong, this is about you basically can put 50% less wastewater through both ways combined.
My question here is, what is the solution? I have heard you guys talking in the past of a pipeline, you have always admitted that that is quite a hard political solution to implement. You have been talking in the past as well of using new processes. It just feels very non-concrete, 2021 is fast approaching. My understanding as well is that you will have to, at some point, do one million less deep well injection over the next three years because of the settlement you have done. It just feels like the time is running short, there is not a very concrete solution. I just wanted to know if there is any update on this.
You have mentioned a lot of aspects of our environmental strategy for the Werra area, the short message is we are getting more and more robust. First of all, in the short term, may I also add, this situation is so outstanding that not only K+S has problems. Such bigger companies which are dependent on the river Rhine and other rivers are facing the same situation. I also mentioned in my speech that we have already prepared a lot of measures, otherwise we would have had standstills of a larger amount. Next year, we will be more robust with this 400,000 m³ additional storage capacity. You are right, our deep well injection permit runs off in 2021. By the way, out of the one million that we promised not to use to the BUND that you mentioned, already half is done.
It has been done this year.
Okay.
We are currently negotiating with the authorities, the solution, the most probable outcome will be that we discharge our waters, not only temporarily, but sustainably in the old mine areas at Werra. That means no transportation costs. That means it's up to us how much we discharge daily. Currently, we have a daily limit of 5,000 m³ for the deep well injection, and that is a problem. Once we do this discharge in the Werra, in the old mine, and we are talking about huge volumes and the possibility to run the mines until the end of the lifetime in the 60s and still discharge it there, then we are almost totally independent from situations that we have been facing this year.
Got it. That's very clear. I just read this on the plan that you had done with the authorities. Is it correct that the saline content of what you're putting into the river also drops a lot in 2021 or not?
As what I just explained to you, this is a completely new concept. Therefore, we would not need a pipeline anymore. We also talk about these thresholds, but it's too early to give any results.
Understood. My last question, if I may, which is a bit shorter, is just in terms of the logistics cost. If I understood correctly what you said before, you said that about the impact on Q3 alone was about EUR 50 million, and that was roughly evenly split between potash and salt. Could you give us a sense on the potash side, how much of it is due to the wastewater, which it should be non-recurring elements, and how much of it is due just to higher shipping costs worldwide that are just a reality? That's the first part. The second part is, can you give us a sense of how much of these two things you're passing to consumers or not?
Yeah. I'm not sure if I can give you by heart all the numbers you're asking for. The EUR 15 million I mentioned. 15. That is only salt.
Yeah. 15, yeah.
That has nothing to do with our saline waters transport. Another number I can give you, the saline water transports and with all the freight cost increase effects that we have on that transport as well, will be roughly EUR 20 million in Q4, and that is all incorporated in our guidance.
Got it. The EUR 15 million of transport cost is only on the salt business.
Yeah.
Do you also have increased logistic costs on the potash business? Shipping rates have been going higher, you also have to ship the product in Germany. Do you also have a higher number on there, or there's no problem?
Yes. If I remember correctly, it's close to EUR 10 million.
Understood. It's EUR 25 total, both businesses combined.
Yes.
Is that correct?
Yes.
Thank you very much for your time.
You're welcome.
The next question comes from the line of Christian Faitz from Kepler Cheuvreux. Please go ahead.
Yes. Good morning, gentlemen. Thanks for taking my two questions. First question would be, you're cutting CapEx spent by a good EUR 100 million compared to your last guidance. Which projects so late in the year have been kept? Can you elucidate this a bit? That's one.
Thank you, Mr. Faitz, for that question. We have not started in this quarter to be very strict with all cost items. We knew that we are running into a difficult year. Then we had the drought situation, and we have been working on saving CapEx and saving costs, but not in a magnitude that we have, of course, now or in the future, a negative impact. The roughly EUR 100 million is the result of a lot of small items. Some postponements into next year, but that will not drive our CapEx over the guided at EUR 600 million in next year, because we will continue to be cautious. I cannot name one or two projects, but it's a sum of a long list of small items.
Again, a smaller number out of the EUR 100 million is postponed into next year.
Okay, great. Thanks. Second question. You already mentioned the good performance of Bethune already, also in October, record rates. What is your current annualized run rate for Bethune?
We stick to the number that we gave. First of all, I'm really happy and proud on that development. We were facing the problems that you know, we have solved them in a tremendous way. We know there are two more steps. We will implement the final grinder pump. Now we are working with the temporary, once the cooling facility is installed, we have reached the quality that we are looking for and the production process and the flow that we are looking for. Currently, we are able to deload the rail cars with free-flowing material. It's really good. We have, one week after the other, a new production record.
It took us a little bit time in Q3 to get to that performance that while we are ending more at the lower end of the guidance that we gave of EUR 1.4 million-EUR 1.5 million, but we are pretty sure that we will achieve the range EUR 1.7 million-EUR 1.9 million for 2019.
Okay, great. Thank you very much.
Thank you.
Before we go to the next question, could I remind you to press star one if you would like to ask a question? Could you please ensure that you limit yourself to two questions each? The next question comes from the line of Thomas Swoboda from Société Générale . Please go ahead.
Yes. Good morning, gentlemen. I will limit myself to two questions. On potash prices in Europe, the gap to the other potash markets, big spot markets, is a little bit bigger than usual. I'm just wondering, what kind of feedback are you getting from your European customers? Is it a good chance that this gap will narrow going into 2019, or is there any bigger than usual resistance to higher prices in Europe?
No, Thomas, demand is strong in Europe. The thing why European prices are recovering a little bit less fast as, for example, Brazil, is that they haven't fallen that strongly when we look into the last decline of the prices between 2016 and 2017. We do see a strong recovery there. It all depends on the pre-demand for the next spring season, but we haven't heard anything that would hinder us from seeing a good season there at this point in time.
Perfect. Second question is a kind of a follow-up on the cost inflation discussion. Thank you very much for giving us indications on the logistic costs. You probably have already a good visibility on wages and energy as well. Would you like to give us some guidance on the cost inflation here going into 2019?
Don't want to dig too much into detail there. To some extent, we are limited to strong increases, for example, in gas prices because we have hedged ourselves beyond 2020 even, and the biggest consumer here for gas is certainly Bethune. We would still feel oil price increases via our suppliers for logistics, certainly. When I take everything together, I would say on our cost basis, a cost inflation of 3%-4% wouldn't be unusual.
That would be including logistics, so all in.
All in. That's all in, yeah.
That's perfect. Thank you very much for this.
The next question comes from the line of Andreas Heine from MainFirst. Please go ahead.
Yes, two questions please, from my side. The first is on the unit cost guidance you have given for next year, being above EUR 200. Can you elucidate a little bit how you get to this bridge from this EUR 205-EUR 210 you would have without the water issues? Looking at that, Sigmundshall is close, which has above average cost, and that the increase at Werra with things which have not to do with the water flow should have reduced the cost quite significantly. In addition, of course, the increase in the production of Bethune, if that is running smoothly. I have expected, I have to say, a number slightly below EUR 200. That's my first question.
Yeah, Andreas, you're right. We said already in the last call, and if I'm correct, I was, that we expect in the midterm, certainly a number below EUR 200 per ton, but not for 2019. We are not yet back where we want to be with our German production. Volker described our progress we are making there. On the other hand, some things like machinery availability and lower K2O content will also follow us in 2019 and will limit our ability to produce. On the other hand, we see a good contribution from Bethune. On average, Bethune is already today lowering our average production cost, but we do not see a number below EUR 200 for 2019 yet. I also talked about the cost inflation we're going to see. This was the question from Thomas right before you.
Mm-hmm. Okay, good. Happy on that. Then maybe still an update on Bethune. The target was to achieve to be EBITDA plus this year. Can you confirm that that is the case?
Yes, I can confirm, it will be a mid-size double-digit amount, the EBIT number. Sorry, EBITDA number, of course, for this year. I also confirm that we want to achieve EBIT break even next year, that is doable with the production range that I gave you.
Thanks.
Welcome.
The next question comes from the line of Patrick Rafaisz from UBS. Please go ahead.
Thanks. Two questions from me as well. The first would be on the bridge into 2019. Is there any reason why we should assume that the EUR 80 million impact you flagged for the outage days, is there any reason why we should assume that that doesn't reverse 100% next year?
No, that is again, the question taking into account the weather situation. If we have, in the next couple of months, a situation with heavy rain and we are able to empty our basins, our ponds, again, 600,000 m³ , and we get the approval, what I expect, to store the 400,000 m³ in the Werra area temporarily. We have 1 million m³ available storage. It is very improbable. That other two requirements, first of all, we must have a window where we empty this basin. Again, the second step has to be approved by the Regierungspräsidium, the authority here. I expect they will do it, and then we are very robust and then we can skip the EUR 18 million impact. Well, we will not see that again.
Okay, thanks. The second question on salt. You lowered the guidance a bit here on EBITDA from flat to slightly down. What has changed here in your outlook? I mean, the freight or logistics costs, you were already aware of during Q3, and we already talked about that for the second quarter. I think it was about the similar amounts. Why did you become a bit more cautious here?
Yeah, Patrick, it's mainly the logistics costs indeed, which are overcompensating the positive benefits from higher volumes and better prices.
The logistics costs are nothing new, right? Did it get worse?
Yeah, they do continue to increase. Last time we spoke, we haven't expected that Q4 remains as dry as it does, for example, in Germany. We talked about freight surcharges because of low water levels, and this is something which comes on top to what we have known.
To give you one example. In the past, when we have shipped our salt, and we are talking salt now, to France. It was a number slightly below EUR 10 per ton. Now we are talking EUR 40. We could not know this development as we had our last call.
Okay, good example. Thank you very much.
Okay, you're welcome.
The next question comes from the line of Philipp Currle from DZ Bank. Please go ahead.
Yeah, good morning, thank you for taking my two questions. The first one is on Sigmundshall. You expect a negative EBITDA effect of EUR 20 million in 2018, I think, as the result of the plant closure at the end of the year, and the resulting significantly lower productivity. Is this value still valid, or have your expectations deteriorated further?
The value is still valid. I really have to say respect to everybody engaged. They are doing a tremendous job taking into account that they are closing their mine by the end of the year. There is no extraordinary negative development to see. We are not expecting this until the end of the year.
Okay. Thank you. The second question, you started with the realization of synergies in Q3. I think the synergy target is EUR 150 million by 2020. Is there already a first success? How high is the amount realized?
There is a good progress. We have started implementing the measures that we have defined for the admin areas, and we have identified a lot of measures in our operations. That is even the bigger lever. We will start implementing them from next year on. We also have started our synergy program in procurement and in some other areas. As we have guided this year, costs for making that happen and the synergies equal more or less. The first positive net effect will be in next year. By the way, I confirm again the EUR 150, but that is after 2020. The first year with the net EUR 150 plus X number will be 2021. That was always the plan.
Okay. Thank you.
You're welcome.
The next question comes from the line of Neil Tyler from Redburn. Please go ahead.
Hey, good morning. Two questions from me. First of all, to clarify on the water issue. In order to be able to empty the basins, do you require above average river levels, or will things returning to a five-year average rainfall level fill rivers sufficiently for you to be able to do that? That's the first question, please.
We would need a normal rainfall for this season, a normal rainfall, and a normal river level, but not only for a couple of days. It would be rather a couple of weeks we need.
Literally two weeks of normal rainfall, and you could empty the basins that are full currently.
More than two weeks. Normal weather situation for this kind of year for the next two I cannot give you a number precisely. If we would see from now a normal weather which we normally see in Germany in December, January, February, March, we should be done with this problem.
Okay, thank you.
No extraordinary rainfall or floods needed for that.
Very good. Thank you. Second question on the salt business. Does your guidance imply any Q4 volume caution brought about by early season demand? I.e., do you think your customers have bought early in the third quarter and therefore Q4 demand might not be quite so robust?
We've seen a good pre-stocking in the third quarter, it was not in that way that we say many have bought what they actually would buy in the fourth quarter. We have incorporated in the fourth quarter, more or less normal quarter. And, yeah, in the end, this depends on if we see cold and wet weather or not, right? This determines in the end the sales volume.
Okay, thank you. I might just chance another one very quickly. Bethune, do the ongoing product issues impact the realizable price of the product you're selling, or is it really just a volume issue at the moment?
No, that is only a volume issue. We are selling to market prices.
Okay, very good. Thank you.
The next question comes from the line of Chetan Udeshi from JPMorgan. Please go ahead.
Yeah. Hi, thanks. A couple of questions from myself. Number one is, do you think, or is there a way for you to estimate how much you might have seen a benefit in terms of your salt business from outage from one of your competitors in the U.S., in Q3 and even in Q4, if you see that benefit at all?
Sorry, one by one, please.
Yeah.
The bids are done. We know the orders that we have in hand in terms of volume and price. If one of our competitors who have won another bid are not able to deliver, they will ask us for more volume, but it's impossible to predict an impact for us.
You don't think you had any impact in Q3, at least?
No.
Second question is, given the cost guidance on the potash production for next year, it seems all of the delta may be compared to, say, the expectation earlier this year to now in terms of cost increase seems more in German plants. Do you think there has been a change in terms of cost per ton production targets even for your new Canadian mine in Bethune? Can you remind me what is the target cost for Bethune? Thank you.
The inflation and extraordinary inflation items are more a German topic. You know, the biggest cost of production in Canada is natural gas. As Thorsten earlier said, we have hedged this even into 2022, not the whole volume, but a good portion of that. Inflation is not a big issue in Bethune. Of course, Bethune has a significant positive impact on our average cost of production, not only due to the fact that primary mining is cheaper than here in Germany, but the secondary mining that we start next year, that has a huge impact. All in all, inflation, volumes that we expect, et cetera, we will be slightly above EUR 200 still in 2019.
What is the target cost structure for Bethune? Do you guys have an aim to get to some specific cost per ton in Bethune specifically?
Yeah, we still stick to the indicated number, years ago, of CAD 90, fully ramped up, own production costs. You cannot compare this with the EUR 200 because it's not a setup, you can find the entire setup in our compendium as well.
Understood. Thank you.
Welcome.
The next question comes from the line of Markus Schmitt from Oddo BHF. Please go ahead.
Yes, good morning. I have just one question regarding your bond, which is due in December. Will you use your RCF to redeem the bond, or is there a short-term issue plan, for instance, a promissory note loan? I think in the past, you preferred to keep the RCF as a backup line.
We have, in July, issued a bond of EUR 600 million, and this was always the plan, to refinance the bond in December with this money. When you look at our balance sheet, taking cash and short-term security or any investment together, we have the money on the balance sheet. For that purposes, we have the money.
Good. Thank you very much.
We have no further questions coming through. I will now hand you back to Dr. Burkhard Lohr for the conclusion of the call. Please go ahead.
Yeah. Thank you all for your attention. Thank you for being interested in our news. Granted, we have a difficult quarter behind us, but I think what we've discussed shows there's good reason to be optimistic for the short-term future of K+S, and especially the long-term future. I'm looking forward, and Thorsten as well, and the K+S team here in Kassel, to seeing you two the one or the other occasion again. Thank you, and have a good day. Bye-bye.
That concludes today's conference. Thank you for your participation, and have a pleasant day.