Welcome to the K+S First Course of 2025 Learning School. My name is James Melbourne-Loh, as a call webinar host. Please note that all attendees are in a listen-only mode until the Q&A portion of the call, at which point you'll have an opportunity to ask questions live. I will now hand over to Julia from K+S for some technical notes.
Ladies and gentlemen, also from my side, welcome to our call. We hope you've had the chance to review our posted slides as well as our Q1 documents available on our website. After the opening remarks by Christian Meyer, we will jump directly into the Q&A session. Some technical notes: please refer to our disclaimer on page two of the presentation, a note on data privacy. Please be aware that the team session will be recorded, webcast, and available as an audio replay on our homepage afterwards. People who ask a question in the team session should be clear that by switching on their camera and microphone, they agree to the recording and replay of video and audio sequences. Before we start into the opening remarks of our quarter, I would like to tell you that our IR team member, Natalie Frost, is moving on within K+S.
She will be heading our forecast and planning department as part of the controlling department from June onwards. Also, I will miss her a lot. I'm very proud that she will do this step. I enjoyed working with Natalie very much. Thank her a lot for all her efforts and wish her all the best in the new role. Now, I would like to hand over to Christian Meyer, our CEO, as of June, for the opening remarks.
Thank you, Julia. Welcome from my side as well. As we announced at the end of April, first quarter EBITDA and free cash flow are significantly above our and your expectations. This was driven by the higher ASP in MOP, our strong production performance leading to a positive inventory effect, and lower than expected costs. We are very happy with the spring season, facing strong global demand for potash and limited supply. Therefore, we have also raised our previous expectations for the full year. We now expect EBITDA to range between EUR 560 million-EUR 640 million. This corresponds to a EUR 40 million increase of the midpoint to EUR 600 million. For this, we assume that the price level achieved in Brazil at the end of April will continue to have a positive spillover effect on other markets and product groups.
In addition, this level needs to be maintained on average in the second half of the year. For the upper end, prices would need to increase further. Now, we expect free cash flow to be slightly positive in 2025, despite the planned elevated CapEx. Just to give you a sense of the phasing of figures for the rest of the year, keep in mind that Q1 and Q4 are our strongest quarters due to seasonality in both business segments. As a maintenance quarter, Q3 typically has the weakest MBTA contribution. Q2 is normally better than Q3, but significantly below Q1 or Q4 levels. For this year's phasing, please also note that Q1 benefited from the positive inventory effect, and Q2 will see an inventory reduction. This alone should result in a mid double-digit million EUR swing between the quarters.
In addition, Q2 will see higher personnel costs as a collective bargaining agreement was concluded as of April 1st. On the other hand, we will see positive price effects. I'm looking forward to answering your questions together with my colleague, Jens Christian Keuthen, our CSO, as of June, and together with Julia from Investor Relations. Now, I will hand over to the operator to start the Q&A session.
Thank you, Christian. At this time, we'll conduct the question and answer session. If you'd like to ask a question, please click the raise hand icon at the top of your screen to enter the queue. If you'd like to ask a question, that's the raise hand icon at the top of your screen to enter the queue. One more request. As usual, K+S would like to answer your questions one by one. If you have multiple questions, please ask one question at a time, and K+S will answer it first. After that, you'll have the opportunity to ask further questions. This brings us to our first question by Aron. Aron, please state your name and company.
Hello, good morning. Aron Ceccarelli with Berenberg . I have two questions, please. The first one is on Belarus. At the beginning of the year, Belarus announced a 1 million ton reduction in exports in the first half. If I look at Q1, we've seen rather the opposite with a record high exports. I'm just wondering, should we expect this reduction to come through in Q2, and how this is affecting your price negotiation if this is happening? The second one is.
Can we start with the first one?
Sure.
One by one. Yes, with regard to Belarus, that's a little bit surprising. You're absolutely right. They announced by the end of the last year that they will cut the production due to maintenance in the first half of the year. We haven't seen a cut in Q1 on the sales side. We expect that they were able to sell their inventories and that if they reduce the volumes due to maintenance, we will see the effects in Q2 and maybe also in Q3. Even in the current situation, we saw a strong demand and increasing prices. Regardless, if they will finally cut the production, we don't see any or we don't assume any big effects to the price trends.
Thank you. My second question is on your energy cost and your hedging strategy. Perhaps could you elaborate if you take an advantage of the recent decline in gas prices for your procurement in 2026, please?
Yeah, thank you for the question. We hedged 50% of our gas consumption for this year at a good of EUR 40 per megawatt hour. Yeah, with regards to the further price development, we are facing spot prices. At the moment, we are profiting from them. They are below EUR 40. At the beginning and presumably at the end of the year, we will have a slight increase, which will affect our P&L.
Thank you. My final one is on specialties and SOP. I noticed the premium versus MOP has reduced. At the same time, supporting capital remains pretty tight. What would prevent the SOP premium to go back to the previous high, please?
Yes. We saw a good increase of the MOP prices. With regards to specialties, they have normally not the same volatility. Neither going up, and also when the MOP price goes down, we saw a stable good SOP price. The premium will change a little bit due to the smaller volatility of the specialties. We have a good demand for SOP, and we are facing also good prices for the rest of the year.
Thank you very much.
Thanks, Aaron.
Thank you very much, Aron. Our next question comes from Christian. Christian, please state your name and company.
Hi, guys. That's me, yes. Good morning, Julia, Christian, and Christian. Great name, by the way. Julia, I mean. Two questions, please, one by one. First, would you be able to give us an updated sensitivity of the potash price moves to your EBITDA? I believe the last sensitivity I had in mind was roughly EUR 80 million EBITDA annualized. If, assuming MOP moves around about $10 per ton, obviously ceteris paribus.
Yes. Hi, Christian. With regards to the sensitivity, we have around 8 million tons of potash products, around 7.5 million in the agricultural business, and 500,000 tons in our Industry Plus business. If the MOP prices increase by $10, then it finally depends if you see the spillover effect as soon in the specialties and also in the Industry Plus segment. The calculation is still okay if you see a EUR 10 increase in MOP, maybe a little bit timely, but you will see this also in the specialties.
Okay, great. Thank you. My second question is actually two half ones on Bethune. First of all, you plan to ramp secondary mining in Bethune for 2025. Any tariff consequence for your Bethune volumes into the U.S. at this point or not?
Yeah. We are in line and in budget with our Bethune ramp-up. We want to ramp up from now currently a little bit more than 2 million tons- 4 million tons. That will not be each year the same step. That depends on the development of the different caverns. We expect a higher volume than last year so that you can calculate round about an average of 100,000 tons each year increasing of volumes. What is very important, the additional volumes are mainly coming from secondary mining where we have a real low cost production. With regards to the tariffs, Christian, we will not have any effects of the potential U.S. tariffs because the potash products, especially our MOP and SOP, are excluded from tariffs. That is based on the fact that the U.S., they do not have real mineral owned deposits, so they finally need the imports.
They realize that potash is a critical mineral for the U.S., and they exempt the product from tariffs.
Thanks very much.
You're welcome, Christian.
Thank you very much. Our next question comes from the line of Tristan. Tristan, once again, please state your name and company.
Hi, thanks. Tristan Loamotte from Deutsche Bank. A few questions, please. The first one is, I just wanted to understand your guidance. You say the midpoint assumes price rises from Q1, but if I take the—and you say the low end is the Q1 ASP. If I take that Q1 ASP for the full year, it implies a 2.9% price increase, which I think translates to about positive EUR 80 million on EBITDA. You talked about cost increase about EUR 50 million, let's say. And you also had inventory write-downs last year as well. If I add those three basic parts, I'm coming to about EUR 620 million for 2025. So I'm just trying to understand if you're being conservative or if there's something else in there that I'm missing. Thanks.
No, we are not conservative. On the one side, we have the expected increase of the price level that we will also see for the rest of the year. You should keep in mind that we have a volatile energy market, especially with regards to gas. In our calculation, we assume that we will have an average gas price of around EUR 40 per megawatt hour. If the volatility will reside in lower gas prices, we will see this also in our P&L. As of today, we are not expecting a decrease in the average cost for gas.
All right, thanks. The second question is around seasonality this year. I was just wondering in terms of potash demand and kind of leaving apart the fact that you have your maintenance quarter in Q3, when do you see the general potash market demand being highest and therefore the supply demand being tightest? Is it fair to say that the demand should weaken in the next few months? Thanks.
Yes. In the spring season, there you see the demand from all global regions. There you see a strong demand in South and North America. You see a good demand in Europe and also in China. We see a lot—yeah, we have some seasonality. You're absolutely right. What was very interesting, especially from autumn until the spring season, where the demand was pretty low due to the seasonality, we saw increasing prices. That's a real positive effect or message for the potash market. We expect that for the rest of the year we see a good demand, especially based on the fact that the inventories globally are not very high.
Thanks. Maybe last question. We've seen some recent drops in crop prices, which obviously flows through to demand for your products. I was wondering what you see as the key factors that might affect crop prices through the year, and is that a source of concern?
No, but very important that we started, for example, with China. We have low inventories, and we have a strong demand, strong domestic demand with pretty high prices, domestic prices in China. With regards to Brazil, there we also see good economics for the farmers and a strong demand. Also for Europe and the U.S. markets, there we see also a good demand and that the crop prices are still on a good level. If you go to Southeast Asia, the palm oil prices are pretty stable on a real good level, and that is why we also see a strong demand and increasing prices. We do not see risk with regards—currently, we do not see risk with regards to the volatility in crop prices.
That's very helpful. Thanks very much.
You're welcome.
Thank you very much. Our next question comes from the line of Oliver. Please provide your company name.
Yeah. Good morning, Oliver Schwarz, Warburg. Thank you for taking my question. We had fairly good weather here in Northern Germany, and what I could discern from Christian's video feed right now, you're also enjoying good weather in the Frankfurt area. I guess that's a less than overall German problem, so to speak. Lots of sun, which is not happening that often in the year at this time of the year at least, and a lack of rain for a couple of weeks now. Our river levels are running lower, too low. That has an effect on the Werra and also on the Rhine River. My question is basically twofold. Let's, for the sake of the argument, just assume that this trend would continue well into summer with water levels in the rivers in Germany running lower and lower.
What would be, A, the effects on your production, and, B, on the demand, and, C, on transportation?
Yes. Thanks, Oliver, for your questions. The current weather conditions, especially in Germany, that's not globally, but in Germany, with regards to the production at the Werra site, that was a challenge in the past. We finally solved the problem with the saline motors, saline production motors with different investments we made. We do not see a production risk. With regards to the demand, especially in the spring season, the product is already brought to the farmers and sales, we do not see any risk anymore. During the summertime, we see more through the autumn, the next big application season. That finally depends on the weather more at the end of the summer and the beginning of autumn. Currently, we do not see any risk from the market in Germany. Globally, we see a good demand and also a good application.
With regards to transportation, we use the Rhine River also. There could be some restrictions due to the low water levels, but our logistics department is looking for alternatives. That could have some impacts, but we do not see any risk that we are not able to sell our production volumes.
Thank you very much.
Some cost effects, but not meaningful.
Thank you.
Thanks, Oliver.
Thank you very much. Once again, a reminder, if you'd like to ask a question, you can click the raise hand icon at the top of your screen to enter the queue. Our next question comes from Akash.
Hi, can you hear me?
Yep.
Yeah. Hi, this is Akash. I'm from JP Morgan. I have a couple of questions. The first one is, could you talk about the current demand trends and the inventory levels in the key potash-consuming regions? Also, demand has been healthy so far this year. Are you seeing the continuation of this trend so far in Q2?
Yes. With regards to the inventory levels, we see globally low inventory levels. For example, with regards to China, they have a strategic inventory at the ports of normally 3 million tons. They are currently at around about 2 million tons. We also see, based on the high domestic price levels, good demand within China. That is with regards to China. Also, with regards, for example, to Brazil, based on the high volumes they imported and also, on the other hand, the good application, the high application, we do not see that they have a real high inventory. They need to import additional volumes for the rest of the year to be able to serve the farmers with additional products.
With regards to the effects to Q2, as we still see a good demand and increasing prices, we do not expect that they—we see more positive than negative effects.
Thanks. One more. In the lower end of your guidance, you are assuming that potash prices may decline in the second half. Could you talk in more detail about the factors that can lead to this outcome and how prevalent is this?
With the lower end, we assume that we see an average price for the whole year at the level of EUR 325. That's the ASP that we saw in Q1. That will finally result in a small decline at, especially in Q4, but that the price level will stay on the level that we saw in Q1 at the end. We don't see a big risk of a decline.
Okay. Thank you.
You're welcome.
Thank you very much. Once again, if you'd like to ask a question, you can click the raise hand icon on the top of your screen to execute. It appears we have a follow-up from Tristan.
Hi. Yeah, maybe just a couple of follow-ups. The first one is just in Q1, the EUR 26 million beat versus consensus. Could you maybe break that down into where that comes from? Would it be fair to say the higher production maybe added about EUR 10 million to that? Where does the rest of that come from? Thanks.
Tristan, it's always a big question if you are asking for the explanation of the beat and consensus, and I'm not asking you for your estimates on our inventory changes. That is why it's hard for me to really do that as a beat versus the consensus. For sure, I can give you a feeling for our own expectations, yeah, because we have that. There, I would say half of the EUR 26 million were explained by a better production and a higher move in the release of costs because of an inventory build-up, yeah. The rest is because prices were flowing faster through our P&L and that we had a higher ASP versus consensus, yeah. These are the two main effects. If you want to derive from that how big was the inventory support in Q1, it's a different question, yeah. It was definitely bigger.
If you then think, and that was an opening remark by Christian, how will this translate into Q2? It will be an inventory drawdown in Q2, as always, just seasonal, yeah. This swing from inventory build-up to an inventory drawdown explains Q2, yeah. I think you have to make clear what is the question. With regards to consensus, I cannot exactly compare with regards to our own expectations I explained and with regards to Q2 as well.
That makes sense. I guess I was kind of alluding to what you retain in Q2, which you pointed to there, but maybe the second part of that is, do you see the better than expected realized prices also repeating in Q2, or do you think that might reverse?
With regards to the price level of potash, we take the over TT, it's still increasing price levels that we already saw until the end of April. That was also the basis for our new midpoint. And we don't see decreases in prices for the rest of the quarter. Currently, currently.
Thanks. Maybe another one, just kind of broad one. The market's changed a lot this year versus last year. You've often talked about Belarus and Russia having a key effect on the potash prices last year. Do you think that there's anything else that has changed in the market this year that's reversed that pricing trend to make it more positive, or is it really just the lack of low prices going into the market that you did have last year that is no longer there?
Yep. In last year, we also already saw that Russia and Belarus are back in the market with their pre-war volumes. Based on the announcements from Russia and Belarus, they are not, based on the fact that they have tightened back for their share in the global market, that they are now also looking to increase the prices to have finally fair prices based on the higher production costs they are facing. What we see in 2025 is that there is still a strong demand, and the increase of the demand is higher than the additional supply. You see the effect that the prices increase.
Thanks.
Thank you very much.
You're welcome.
We have another follow-up from Oliver.
Yeah, it's me again. Sorry for that. Just a quick one in regards to your specialties business. It seems to me that especially the price for SOP is a function of both MOP price and the energy costs attached due to your competitors mostly employing the energy-intense Mannheim process. Obviously, at year-end, we had lower MOP prices but also higher gas prices. Now we have higher MOP prices but lower gas prices, which might explain the lack of or the lower volatility of SOP prices. Is that correct, or am I missing something? That would be my first question.
With regards to the specialties and also for the SOP, normally you have a little bit of time lag compared to the MOP volatility or the MOP increase. That is maybe one of the reasons. What is very important for us is that we have good demand and good prices still for SOP, and that some of our competitors are coming back with some volumes, but they are still facing some challenges. That is also the reason why the SOP prices are still at good levels.
Thank you for that. The second question regarding specialty is, can you please elaborate on those specialties or the price development of those specialties that are comparable low on potash?
Yes. They have also nicely developed. Kieserite , for example, Korn-Kali, Patentkali, these are the ones you are referring to. They are all increasing, and they are increasing with a time lag like SOP. Yeah. And SOP, by the way, one addition to that, sulfuric acid prices are another part of the equation that you were doing. So MOP, energy costs, and sulfuric acid prices, yeah.
Thank you for clarifying that. That was my question.
Okay. Do not forget the time lag with the specialties.
I won't. Thank you.
Thanks, Oliver.
Thank you.
Thank you very much. Once again, if you'd like to ask a question, you can click on the raise hand icon at the top of your screen to enter the queue. We will pause here briefly for any questions to generate. We have a question coming from the line of Aron.
Hello again. Sorry for the follow-up. The adjusted free cash flow in Q1 was clearly much stronger than expected at the EBITDA. Perhaps could you elaborate on the midpoint of your guidance? What should we expect in terms of working capital changes for the full year? Thank you.
Yes. With regards to the working capital, we expect an increase based on the fact that we have higher potash prices. That means the receivables price related will be higher at the end of the year compared to last year. That will have a negative effect on the free cash flow. Based on the higher taxable earnings, also the tax payments will be higher. That will compensate a little bit the increase of the EBITDA.
Thank you.
You're welcome.
It appears that there are currently no further questions. Handing back to Christian for any final remarks.
Yeah. Many thanks to all of you. Thanks to my colleagues with this new setup. We hope to see you soon on the road and have a nice day. Bye.
Bye-bye.
Thank you. Bye.
This concludes today's episode. Thank you and have a great day.