Earnings Call: Q1 2017

May 9, 2017

Welcome to the K plus S Conference Call regarding the publication of the quarterly report Q1 twenty seventeen hosted by Norbert Steiner, CEO. For the duration of the call, you will be on listen only. However, at the end of the presentation, you will have the opportunity to ask questions. I'll now hand you over to Norbert Steiner to begin today's conference. Thank you. Thank you very much. Good morning, ladies and gentlemen. Welcome to our Q1 twenty seventeen conference call. It has been a while since I hosted those kinds of calls. As you know, I will hand over to my successor, Brucut Lohr, who will be in charge as CEO of this company Friday. Thus, it was important to me to host this call one last time. I'm joined by our Head of Finance and Accounting, Jorg Bechtenhausen Torst Bruckers, our future CFO and Jorg Greifman, the new Head of Investor Relations. So let's start on Page two, please. We are very proud to announce that we have celebrated the grand opening of our legacy project. Together with around 700 guests, including the Prime Minister of Saskatchewan, we have handed over the site to our operations team. This finally concludes successfully the five year construction period within the budget of EUR 2,300,000,000.0 that we have projected in 2013. As it is common in Saskatchewan and as a negotiation to the province and its people, the mine has been renamed to Bethune Mine. Bethune is the closest community to the site. We expect to have the first tonne of MOP available by the June. By the end of this year, the site will reach its 2,000,000 tonnes capacity and then ramp up further to about 2,000,000, 2,900,000 tonnes by 2023. But soon will contribute positively to the EBITDA in 2018 already. Ladies and gentlemen, when I look back to the multiyear construction period of legacy, I must say the road was from time to time bumpy. However, to say pickup is certainly not unusual in case of such a big undertaking like building up the Polish mine. Eventually, can say, we made it. And we are looking into the future of this year with great optimism that it will begin to serve our customers very soon. Globally, we will do this with our own network capabilities. In The U. S, our marketing agreement with Koch for developers will grant us access to customers and the storage space we need to serve them. We do not see any shortage of storage capacity for us like it was VNet recently. Please turn to Slide three. As we have already guided, production in 2017 cannot run at full capacity yet as the permits we have been granted in December includes the cover of restrictions, including a maximum limit for the daily injection volume. This will continue to impact, in particular, production at our Hatter plant when the weather motor levels are low. We experienced this already happened during the first week of the year, unfortunately. On the other hand, we made good progress to evaluate and implement alternatives for the disposal of this quarter. Besides existing measures for temporary or permanent storage apart from our production plants, we have also again increased basin capacity on-site. This increases our flexibility but is still not sufficient to full production in prior periods. However, it ensures that the run time should be above last year. Now, for example, the data levels are not sufficient, but we expect production until the May at least. There is also good progress on the new KCS facility, which is an important element to reduce dependency on the weather and the water levels. The KFC will reduce saltwater revenues by around 20% from 2018 onwards. This will help us to secure production to a larger extent and will make us more much more independent from the water levels. And the KCS expects further marketable and profitable product of around 250,000 tonnes. Slide four, please. Our whole 2020 strategy is fully on track to achieve the stated target of a normalized EBIT level above €250,000,000 by the end of this decade. We normalized our annual sales business earnings to account for unusually strong net asset volumes as we saw in 2015 or unusually weak de icing volumes as we saw in 2016. This internal measure enables us to track the development of our business without the impact of unfavorable factors. Our Novelis earnings are developing steadily and positively as a result of the numerous earnings growth initiatives we have been implementing. Focusing on further efficiency measures, new market opportunities like the copper leaching business in South America and of course, the strength of our highly valued customer brands will enable us to meet all those. And I would like to repeat that there's a good chance that we will be even better off. We firmly believe in the DISP business, and we are confident that it will deliver attractive margins over time. However, as we continue to strengthen other elements of the business, the earnings coming from the more stable non divested segments will contribute more than 50%. This will reduce volatility in the sales business further. Slide five. Q1 'seventeen has again proven that our diversification in Salt works well. Higher revenues from our products that are not applied for Roast Safety increased by 7% versus Q1 twenty sixteen. On top of that, we saw a stronger winter business in Europe and in Canada, which was able to offset lower volumes in U. S. Please turn to Slide six. The sentiment in potash markets remains sound. Demand, especially for specialty products, was strong both in Europe and in Asia. In Germany, for example, in particular, corncartes was strong as customer inventories were on low levels. We also saw continued good demand for our SOP products, especially premium rated, on healthy price levels. The average selling price continued to increase quarter over quarter. We are now 9% away from the low in Q3 last year, and this despite the case again in unfavorable product mix due to the production standard that happened. Please turn to Slide number 10. All in all, we achieved a 3% revenue increase in both business units. However, the bottom line faced various headwinds that led to an EBIT one of €137,000,000 about 40% below last year. Our Polish business improved from a very depressed second half in 2016, but again, suffered from the production expenses of twenty five days in Q1 burdened us by about €40,000,000 On top of that, there's been lower year over year potash prices and the onetime payments to our employees as a result of a wage tariff review, growing the EBIT by around million each. With regards to the one off payment, we agreed to do this in this way instead of increasing monthly wages, which entered into the P and L overtime. With regard to the business unit sold, it is non de icing business as higher volumes in de icing were offset by lower prices for oil pulp in North America after a mild winter in the season twenty fifteen-twenty sixteen. Please turn to Slide eight. We hereby confirm our outlook provided a few weeks ago when we released our Q4 numbers. Unit one for 2017 is expected to increase tangibly versus the EUR $229,000,000 reported for 2016. Slight tailwind from potash prices and from higher volumes in both business units is projected. We will continue with our initiatives to reduce costs across the group and execute our Solst 2020 strategy. On the other hand, mainly the production staff in Canada will grow our EBIT significantly more than the 19,000,000 seen in 2016. This is because C and A kicks in at amounts exceeding the gross profit from Polish Day. We anticipate a negative EBIT contribution from that ceiling of about €150,000,000 cash per now. On top of that, visibility in the German Polish environment remains low. The permitting has been granted along with our additional measures will give us some relief, but it might not be sufficient for all production year round during the dry period. This means depending on the water levels of the Werder River, our Hartog plant will continue to operate on an on and off basis. Extraordinary dry periods, it still have a significant negative impact once again on our German production, which could impact profitability heavily, and the summer is still ahead of us. Concluding Talpa 2018 onwards, the new KCF facility will help us to reduce the volume of ceramic waste water by 20%. This means that we will reduce the risk of production spend still significantly. And our platinum mine is expected to deliver a positive EBITDA by then and our salt business continues on its path of consistently improved earnings. The group's CapEx will drop, and this will result in a positive free cash flow from 2018 onwards. The group will then make a first big step towards deleveraging. Last but not least, our midterm outlook on Slide number nine. Our fourth twenty twenty strategy is well on track to deliver an EBITDA of €1,200,000 by 2020. Our business unit Polish aims to achieve a EBITDA contribution of €1,200,000,000 in 2021 with help of its key market strategy. But here, of course, is an important component of this in this respect. We are aware that today's potash prices make the target very ambitious. However, we still believe the prevailing low price environment is not sustainable as the mid- long term trends remain intact. Additionally, everybody was indicated as we're deeply committed to delivering the EUR 1,600,000,000.0 by 2020. And we will keep this momentum. So ladies and gentlemen, thank you for listening so far, and we now look forward to your questions. As always, we are going to answer the questions one after the other. Thank you very much, And the first question comes from the line of Christian Faitz from Kepler Cheuvreux. Please go ahead. Yes, good morning, Thanks for taking my few questions. First of all, how do you see the inventory situation for de icing products at present in on both continents going heading into the Q3, Q4 demand season? Second of all, on the potash side, in terms of demand trends for potash in Europe, how has this developed so far in the crop season compared to last year? And then my final question, and then I'll get back in line. Can you please share with us some details about the Huttog expansion, I. E, the tailings pile capacity? Thank you. The first question pertaining to the icing inventories. Of course, question is to be answered quite simply. We will have a relatively normal situation in Europe as and this is an issue that is also not to be answered maybe in general. There have been areas in Europe where we are strong, where the winter was below normal, and therefore, also in these areas, the inventories are above normality. That means that the early procurement for the winter season twenty seventeen, 'eighteen will be also reduced. In other areas, winter was good and long, and therefore, the winter is low. That means that there, of course, the request for shipping in the rest of the year will be higher. And in these areas, I could foresee that we at least stop the trends towards lower prices and maybe have the chance to add one or two or the other one or other euro on top of that. Canada was more or less in the same line attractive. And also there, as we were not significantly above normality in the first quarter twenty seventeen, this will be normal business there as well. And as you might remember, in that area, have long term contracts with an embedded price formula that grants us small additional, let's say, revenues on that, and this will continue to happen in 2017, 2018 as well. On the other hand, of course, North America was not really successful when it comes to de icing, and we know the answer of that. Inventories are high. The price trends will turn downwards even more than in the last year already. We don't have any indication where it could go to because it's much too early to talk about early procurement enterprise formula for 2017, 2018. But there is not a very strong tailwind for price increases in that area. Second question, European demand for our fertilizers. As I've mentioned, the first quarter was rather strong. And the reason that we our customers had to fill up their warehouses first because the early procurement in 2016 was on a relatively low level. But as main set also, much material has been shipped into the market already. It is premature today on the May 9 to say something for the rest of the second quarter, but it is an old experience that after a strong first quarter, the second one is not that strong anymore. So this should indicate the trends exactly. But once again, I am absolutely shy to give you an outlook on that, what we will what we will have achieved at the end of the second quarter. But all in all, I have the impression that our the vehicle, the collision and the vehicle product is rather content with the business so far and also optimistic for the rest of the spring season and also for the year 2017. Third question, expansion of HEAPs. I think when you follow K BOSS as you do over a long period of time, you have seen that nothing within the conduct of mining activities goes without the permit and that the requirements to get the permits have been increased significantly. The work to do this has increased very, very much. We need to have an expansion or additional land that we can use for the tailings piling in the other plants like other tailings piles as well in the future from 2018 onwards. But in order to prepare the underground for the storage of that social residues, we need to start earlier. And this what we want to achieve in the next couple of weeks. As it has proven in the past that we cannot exclude some kind of delay, we wanted to give that hint also a little bit more specifically in our Q1 report of 2017, like we have done that in other cases as well in the past. So from that perspective, I'm not shivering right now. But on the other hand, we cannot exclude that our expectation the expectation to have it done by the June can be postponed for a couple of days or weeks or so, and this needs then for us that we need to adjust our preparation operations for that. But this is something, once again, where KFSS needs to say that we are, meanwhile accustomed to that. Great. And additionally, any additional questions you want from our side? Thank you very much, and all the best for your next step in life, Mr. Schuyler. Thank you very much. The next question comes from the line of Jeremy Renanias from Bernstein. Please go ahead. Jeremy, stop me. Let us answer the question one after the other. Jeremy? Hello, Jeremy. Your line is now live. Please go ahead with your question. You please check if your line is muted? Okay. Would you like me to go on to the next question? Of course, please. Maybe you can come through there again. Okay. Thank you. So the next question comes from Lisa Denis from Liberum. Please go ahead. Good morning. You delivered strong sales volume in specialty that visit was 15% high year on year. And I believe if you could provide some color on the dynamics you were seeing in the first quarter, how much of that would be related towards restocking? And would it also be possible to provide some color for the rest of the year? That's my first question. You. Luka, it's Tosthen here. We have indeed seen a good demand for specialties both in Europe and overseas. And it's time to remind you that Specialties is not only SLP. We have sold a lot of corn kali into all regions, actually. And it was really because of the favorable weather situation. So it was applied to the soils, and we don't have the feeling that there was a lot of inventory up filling. On the other hand, we may not see the same demand in the second quarter, right? So there was a lot of usage of favorable weather situations in the first quarter. And this is not this will not continue into second quarter. Okay. And then on the weather disruptions, you had €36,000,000 of weather disruptions in the first quarter, where I believe one million and twenty five days gives you €25,000,000 related to the hot earth interruptions. I would just want a bit color for the rest of the year. What is your base case assumption? Do we still assume €55,000,000 of hot earth disruptions for the full year? Thank you. It's a good question. Robert Steiner again. So what we have indeed seen in the past is that we have had twenty five days of staying still. And when we look down the road, of course, we have a certain idea about the situation at the Werra. Please take into consideration that compared to the last year, we have made a lot of progress with you to the securitization of also the entire normal production of the Werra plant, particularly in Atoll. First of all, we have increased the size of our basins where we can source salted oceans. That enables us for a longer period of time to continue this work even if the water levels of the Werra River are low. That means that, of course, we need to stop that utilization of the basins when we do not see the possibility anymore to discharge the faulty residues into the relative or into the other. But from today's perspective, we are of the opinion that at least up to maybe the May, and I would also say June, this is the visibility that we have to continue to operate. Secondly, we have opened the door to ship away salty waters into one of our mines in Lower Sexime, where so far we have the ability to discharge salty waters from the piles, but that's the way we keep the permit also to use it for the discharge of production water. So this will also be a good volume. Of course, this will require transportation costs, but this is certainly always more beneficial for the plant compared to the standstill. When we use drilling in the neighborhood, we are filling an end of lifetime gas storage facility in Bamborg. And therefore, there is a multiple opportunity to get away from it. So we want to show or we want to say that we cannot exclude that with all these additional means, it might happen that HATOF will see a stem cell again, but the likelihood that it occurs compared to year 2016 has significantly been reduced, and therefore I do not want to speculate about any day or any days or any time where the stenting and half off can occur. Nevertheless, it is something that we want to make sure to the financial market that it cannot be excluded in that, let's say, more remote situation when we compare it to 2016. I want to make one remark. I want to make one remark. This €40,000,000 that you were referring to includes two elements. This is, of course, the element of the lost day cost or or nonrevenue of the lost day and, of course, a certain portion to to to ship and and to ship material to other areas in Germany. So I would prefer for the future, but I'm not there anymore to have it separated because it is then more transparent to us and also to Okay. Thank you. Next question comes from the line of Markus Mayer from Baader Helvea. Please go ahead. Yes. Again, a question on Hattof add on. So this potential delay of this permission basically, this only as you just said, I only expect for a few days or maybe one to two weeks. So it's nothing where you expect that this might even be late longer? That's my first question. We can only be transparent and so far transparent to you that you say there is a upcoming necessity for for further permit. Mhmm. And as the past years have shown, it might be that our expectation to get it in time might not be fulfilled by the respective authorities. And it is absolutely impossible for me to speculate if the delay occurs, whether it is a delay of days or weeks or so. Yeah. Okay. For us and my and personally, for the board of executive directors, it's necessary to make you aware of that, that there is a risk, but not to speculate about days or weeks or months of delays, and therefore, I would also not be sitting here and speculate on that. Okay. And then with this longer and more complicated approval processes, Is there any chance for you then for this permissions for 2019 and beyond to start this permission process earlier? Or has there's no effect on the timing and if there's a delay or not and the permission to get them. We are accustomed to long term processes, but obviously, we are seeing that also the requests for data and explanations from the authorities also is increasing more or less within every of such procedure. I would not swear that the time that I mentioned right now is correct, but I think we have started with the approval process for the expansion of the heart of mind already three years ago also, in 2011 already. And you see where it is in the beginning. It is always slow. You can see, of people see also from the authorities there is much time, but then the momentum starts, and we need to see that also with due to their own positioning, ask for more and more and more what we cannot foresee at the beginning of such a process. So I think we never started too late, and it cannot be our future to say I need an extension. I'm now putting a figure into the air in 2027 and to start right now. Nobody can foresee that, yes. But in this reality, in Germany, therefore, we need to do the utmost. I can only assure you that we have increased the number of personnel that is dealing with that kind of request. Significantly, we are having external consultants also on board in order to come to that timely permits. But once again, you are always surprised and then you are running after the questions and the reasoning of the authorities. This is from time to time, I admit, also frustrating, but we we work hard on that. Mhmm. To give you a complete different color on that, how it can be done, we achieved the permit for the tailings piles in our Bethune mine within thirty two days after the request for approval. So this is something which you also need to see from time to time that Canada facilitates the matter. And then the last question regarding the news which popped up, I think, a few weeks ago on that, again, the German legislation looking on the recently given permission for deeper injection. Can you shed some light on this kind of process here as well, please? Yes. I know you might remember that a couple of people within K plus S and also the mining authorities in Turinia are prosecuted, including me. Court for mining has rejected the request for that legal treatment or legal procedure last September, and we expect to have the decision the final decision of the Superior Court in MENA within the next couple of weeks or months. It is not possible for me to indicate the right timing. And in that context, this state attorney has also extended his view into not only into Telenya, but also into HESE. He is collecting material with the same background, and as he has obviously been able or been given a lot of material from the health authorities, he has to do a lot in order to review that by himself and by his reports. And so this means, quite simply, that this procedure will continue most likely also beyond the final decision of that court in Vienna. The legal background from our perspective is not different. We have been granted permits in Turinia as well as in Hethi according to law, and therefore, we are not, let's say, in use about the procedures that they stated for me, but we are also not afraid from the situation. But no real, let's say, indication about any end of the procedures. Okay. Thank you so much and all the best for the future, Mr. Steiner. Thank you very much. The next question comes from the line of Paul Walsh from Morgan Stanley. Please go ahead. Thanks very much and good morning guys. My first question, how many days of disruption have you suffered in Q2 so far? And in terms of the $10,000,000 in costs that you guide towards in terms of transportation in potash and magnesium products. Is that a good run rate from Q2 to Q4, please? That's my first question. So far, we have no standstill date in Q2. This is the question the answer to the question. And you were referring to the costs to bring the brine away? Or Yes. Exactly. Yeah. We once said we once said that we have now the ability to bring brine into old mines and all the measures Albert was referring to earlier in the amount of a good million cubic meters. And some had to be transported by trucks, some by train, but our best guidance is that between that every cubic meter cost us between EUR25 million and EUR30 million. EUR25 million to EUR30 million. My second question, really just a clarification. I think you pointed, Mr. Scheiner, to legacy costs of about EUR 150,000,000 EBIT burden this year. Is that correct? Correct. Okay. And EBITDA positive next year, any rough idea on EBIT? Year after. Thank you. And my final question, any insights into the China India contract settlement? What might come How you think the negotiations are going according to what you guys are hearing? No. We are not yet part of that discussions, and therefore, no insight, unfortunately not. Said India that China will be prior to India, but it's a gut feeling. Okay. That's very clear. Best of luck with everything in the future, Mr. Shaina. Thank you. Thank you for you as well. Thank you. The next question comes from the line of Georgina Iwamoto from Bank of America. Please go ahead. Good morning. It's Steph Fostle here from Bank of America Merrill Lynch. Thank you very much for the presentation and for the opportunity to ask my questions. I'll start first of all on SOP. You commented in the release on the solid demand environment for SOP over the course of sorry, yes, over the course of the quarter. If we go back to the early part of the year, we saw some price hikes on SOP. Can you just comment in terms of what you've seen in Q2, whether or not you've been able to push through additional price hikes there? And the second part of the question, again, on SOP is you have a long term supply agreement, which is rolling off this year on SOP. Can you just confirm when exactly in 2017 that rolls off? And perhaps if you could remind us what the contracted volumes under that contract are? Thank you. So we'll start with the second part. I assume that you are referring to the contract that we have with you, okay? And this contract indeed expires at the end of the year. I need to say that I have not in mind the volume that is under contract, but we certainly foresee that there will be negotiations between us and Eurocam in order to continue this contract also for the time after because they might have the opportunity to source SAP from us for their unsurprised operations, and this is the most convenient thing for them. So this is an extraordinary contract, as it is so long, has been established for a long time, but it will continue like other contracts for the SOP delivery to the MTK industry. They are, of course, only quarterly or half year contract, but this will have a longer duration. So hopefully, and I'm quite optimistic also here in the conditions for us. Yes, Georgina, with regard to demand, we highlighted our specialty. But please keep in mind, specialty business is not only SOP in our packaging. On an annual basis, about onefour of volumes a is quarter of the specialty volumes refers to SOP. We also produced a bunch of other specialties, the kegelite or corn carly. And here, corn carly demand was also pretty strong in the first quarter. We talked about prices for SOP because it's always in the discussion on the market. And we're still experiencing high prices. We said already in the last quarters that we are away from the peak, but the prices are still on a pretty healthy level. Okay. So just to go back on the Eurochem contract then. So the existing contract doesn't expire until the end of the year. So if you do perhaps get an increase in price on that particular contract, it wouldn't come until 2018. Is that reasonable? Yes. Okay, perfect. And my second question was just going back on legacy again. Can you just confirm what you do expect to sell into the market during H2 twenty seventeen and in 2018, please? Yes. We have plan to sell around 600,000 tons to the market in 2017, in the second half of the year. And in 2018, I would say, we have been, I mean, the prudent in the past, not to say that the entire 3,000,000 tons that we can that potentially we can produce will also be produced and sold to the market. So I would say maybe 10% below the capacity means that we are in the neighborhood of 1718000000 tonnes for the entire year 2018. Okay. So 2018 will be around 1,700,000 to 1.8 in terms of sellable volume. As we started later, you might remember that our initial plan to start the operations was in the end of twenty sixteen. So we need to shorten and steepen the ramp up in 2017 significantly. And therefore, we do not want to frustrate the markets by saying we were not able to do 2,000,000 tonnes. Therefore, this is maybe an issue of to be cautious. If we are able to do more, then we will, but you should calculate with 1718. Okay, great. Very, very helpful. Thank you very much and all the best for the future. Thanks. Thank you. The next question comes from the line of Neil Tyler from Redburn. Please go ahead. Yes, good morning. A couple from me as well, please, mainly concerning the Baton project. Following on from Stephanie's question, bear in mind the ore grade available, how should we think about the impact of those 600,000 tonnes and again in next year on the overseas realized price that you expect to in comparison to what you sell currently? That's the first question. Yes. As I have mentioned in my speech to the grand opening last week, I mentioned that we will enter into the market with our legacy products as an experienced long time party and supplier in the potash market. That means and this is obviously the backdrop of the question that we will not undermine our price levels by the volumes that we will get out of the Q1. Please remember that we always have indicated, and this is still also the truth, that our customers have asked us to deliver more to ship more than we were able to do from our German operations, and this is now the time where we can sell more to them. But due to that, I'm only referring to that what the business units have said and are deeply convinced that we will choose from the market. We will be able to sell in the combination of MOP and specialties the entire production that we will be able to do in 2018 and years beyond. Once again, this will not be pushed into the market with, let's say, brutality because we want to maintain decent price levels. And so far, we never have undercut price levels in the past and we'll continue to do so, to act in this way. And we will find also the areas and the room to place our material without maybe negative impacts to the entire market. This is what I have learned. And as I have been following the sales policy of our operations, the division for more than twenty years, I can only say this is that's what we have always been doing and we will continue with that. Thank you. Switching away from Bethune specifically, but if I sort of tease out the various one off costs in the potash business in the first quarter relating to the interruption to those start up costs. It looks like the cost per tonne came in at something close to €190 just above. So a little step down from last year, which I think you quoted at $2.00 1. Can you help us with your estimate of what this ought to be on a clean basis again in 2017 and in also in 2018, if you're able to, once the additional operating costs related to the KCF plant and any other measures have stabilized? Daniel, it's Kofi. You can strip out a lot. When we just strip out when we take our usual method, revenues minus EBIT over volume and then strip out the legacy the negative contribution from legacy to the EBIT, I don't want to call it OpEx because it turns from run up cost to real OpEx in the future. The end of this year should be approximately on the end of twenty sixteen. And we said that we go ahead that we, first of all, see effects from Fit for the Future becoming effective still in the coming years. And we also go ahead with our cost discipline. So I'm not going to lay out a number now for 2018, but we shouldn't expect a jump in cost. Very good. Thank you. And just to be perfectly clear, the end of twenty sixteen number that you're referring to is what in terms of cost per tonne? I think it was February when you strip out legacy. Right. Okay. Thank you. And then just on volumes, finally, the if we think about twenty eighteen and then again excluding Canada, including the 250,000 tonnes from the KCF plant as well, should we now be thinking about something between seven point two million and seven point three million tonnes from the German operations? Is that the right way to think about it? I'm talking about the time when nothing. I think we should be a little bit more cautious and think about rather than higher. And we need to see that the KCF will be operated from the January 1 onwards. But in the first quarter, if I'm not completely wrong, it is dealing with the method to reduce dissolving orders, but the production starts later. So the year 2018, we'll also not see yet the entire possibility of the 250,000 tonnes. So rather, I would say I would recommend to go to 7,000 rather than the half. Okay. That's very helpful. Thank you. And thank you for all your help over the years, Mr. Steiner, and all the very best. Thank you very much. The next question comes from the line of Andreas Heine from MainFirst. Please go ahead. Yes. Two questions I left. I'll start with the first. Just to remind myself, is the CapEx for legacy completely done with Q1? Or is there still something coming in Q2? Let's say, in fact, it's done. It's filled in, but the invoice will come later. And therefore, of course, it will run, I would also say, over the entire year with reducing volumes quarter on quarter. Okay. And it is booked and accounted for accordingly. So it's not that if you have reached a milestone and then the when you are obliged to pay, you wait for the invoice until you book it as CapEx. Is that right? What is it? It's it's the Your pet is helping me answering. I hope he is a little bit away from the phone. Then then construction is finished. I can't really book the assets accordingly in the balance sheet. And that's not only if the invoice is coming in, is only the point that we have to pay. But for the calculation, it is necessary to have the construction done. Okay. So in the cash flow, it is an issue for the full year still, but declining quarter by quarter, but in the balance, basically done. Yes, correct. Yes. Then coming to the trends going forward in the second quarter on prices. The market prices were slightly going up over the recent months. And you should have with the Huttow plant fully in operation also a better mix effect. Is it fair to assume that the upward trend you have seen in the last two quarters on the average price will continue in the second and third quarter based on this assumption? I would say this is correct to assume that. Indeed, we had the first sale of Huttof in 2016 from the second quarter onwards. Of course, we were there in a situation that we could make use of our own inventories, that it was not feasible. So immediately but in the third quarter, inventories, particularly with new to SOP, were reduced significantly. So that at least from the Q3 onwards, would see assuming that HABORT plants will run smoothly and continuously, which would have a positive effect on that from that mixture situation. And of course, we still are looking to those people that are negotiating in China and in India. And I think everyone in the world holds sums and for figures for them that they increase the price to some extent, and I'm optimistic on that as well. So altogether, we should perform in the direction where your question goes to. Okay. Thanks a lot, Wehrmacht question. And again, also all the best to you. Thank you. Thank you very much. The next question comes from the line of Patrick Rafaisz from UBS. Please go ahead. Thank you. Good morning. Two or maybe three questions. The first is on the one off payment for employees. I understand you had a similar payment a couple of years ago. Mhmm. So how should we think about this going forward? Is that something you'd expect to reoccur on a two or three year basis regularly going forward, or or will there be at one point an increase in wages and sustainable increase in costs? Or how should we think about this? You'll never know. It depends on the situation in which the company is. And then the two parties, that means the workforce as well as the union sits together and discusses what is the best for the particular situation. There are also numerous reasons why in the one year we say we pay it we make a onetime payment or we come to the general procedure that the wages are increased by a certain percentage. The difference is that this onetime payment do not really increase the level of the wages. That means that the money is there, but the level of personal wage continues over the year and is not increased in that percentage. So this is, from time to time, also an advantage for the company compared to a situation where we do that annually on a certain percentage basis. So it depends on the situation of the company, on the view that the two parties of that tariff contract have and also on the heavy situations like elections of the works council, etcetera, etcetera. So the general rule will continue to be the percentage increase. But from the perspective of the company, also this onetime payments are rather attractive, but we cannot come to that maybe on a year to year basis. Unfortunately, no rule to be established on that. Okay. And then some a follow-up on the tailings pad expansion. I realize you don't want to give us too many details, but by when would you need the permit the latest so that given the lead time for the expansion, you will be ready for seamless transition in in in 02/2018? And let's assume worst case since you don't receive the permits until year end, how much production could you actually lose in the worst case scenario 2018? Sorry, I do not speculate on that. We will not get an answer on any tonnage that we might lose. Once again, I can say that we are in a position to start for the preparatory works during summer. This also has something to do with seasonality, but you cannot do everything in mother nature that you would like to do at any point of time. So maybe you can shorten that and you could postpone it until maybe one month or two months or a quarter later. So there are various elements that are to be taken under consideration in order to come to a solution. But of course, at one point of time, and the final by the way, the final permit is expected only for the next year. We are talking about permits for the preparatory work here. And then when we are able to squeeze that from normally three months to two months or so, gain time. Our main purpose was to make you aware of that situation because the only reference to the explanations that we have put into our annual report when we see the necessity are from our perspective not, let's say, clear enough or transparent enough, we are working on that. And therefore, I will also note publicly, and this is public call somewhere, do not speculate about any worst case scenario. Please accept that. Okay. And the last question, a follow-up on SOP. Would you say you already sounded quite confident with SOP at the last call. Would you think sequentially as the markets in SOP improved structurally and for the rest of the year as well? Or would you say we just maintained the good levels we already saw earlier in the year? Neither bad nor better. So it's stable in demand and it's still healthy in terms of pricing. Thank you. And also from my side, all the best Mr. Stijn. Thank you. The next question comes from the line of Oliver Schwarz from Farbergh. Please go ahead. Thank you for taking my questions. One by one, as we said, depreciation in Bethune for the rest of 2017, could you give me a number for that, please? We always said we expect between 10,000,000 and 15,000,000 per month as we expected today. Okay, great. Secondly, depreciation in the Salt business in Q1 was a tad higher than it was last year. Is that a trend? Or is that just, let's say, a blip on the radar screen that can be disregarded? Who wants to answer that question again? Must be very important. Listen, we look it up and come back to you. Is that okay? Okay, great. And if anybody else is interested in that question, of course, please come back to us at this point. There won't be any, I guess. Lastly, coming back to what you not perhaps not lastly, but in regards to Hatoff sorry for labeling that again. In regards to the product that you're expecting to get, can you confirm that you're all, let's say, a bit worried about the possible timing, but not worried about any questions relating to the size of the expansion process or program that you have for that tip? Obviously, that's related to the permit you got for the wastewater discharge where you didn't get what you applied for. I think we are talking about a permit that contains several steps in barrier. And therefore, need to start with step one preparation of the the the of the area number one. Then we use that area and and put it up, and then we take area number two and three and four and so. On. I have no idea that we could be limited with you to that what we have asked for for the entirety, but this is something that will lead us. I do not know the exact year to some 2030 something. So there, I do not have any doubt with the question of the, let's say, time of the permit for the first steps. And once we are there, then the final big permit, so to say, should be there in 2018, and this will be then allowing us to go to these time frames of 02/1930, let's say, 203x. I do not remember the year exactly, but it should be then the permit that we have requested for. And of course, this is something that has been always taken longer time frames in the configuration than all permits that we got for the, let's say, it's also not a discharge. So twenty, thirty years in the past have been customary, and therefore, we should be in that area as well for the other and also for the other extensions of the pipes in Wintershall or in other areas where we are continuing production. Very clear. I'd like to sneak one last one in, if I may. Alluding to what you said, Mr. Stein, in regards to the sales team and the potash business and that they are able or that they are supposed to be able to push in additional 1,800,000 tonnes in 2018 when compared to the numbers you have in the German mines. In the past, your sales team was in the position that they had to manage, let's say, declining volumes. That will be the first case that they can deal or have to deal with a huge increase in volumes. And still, you're very confident that you can do that without having to put pressure on prices. Why is that? As we are capable. Okay. And please don't forget, we are also maybe in the sunset of our signal cell count. So we are talking about 2,000 something before 2020 that we will then reduce our exposure by that, I think, 600,000 pounds of MOP and specialties. And therefore, our team always has been able to sell more. We were, from time to time, more included in discussions why can't you deliver more than we want to have and keep our customers satisfied. So I think it will not be an easy task, but I'm full of confidence that the team will manage that without, let's say, turning the price levels into results. Very clear. Thank you very much, and all the best for your future. Thank you very much, by the way. The increase in DNA is mainly FX related in the fourth quarter. Okay. Thank you. Welcome. We have no further questions coming through. So I will hand you back to Norbert Steiner for any concluding remarks. Thank you. Yes. Thank you very much. It was once again and finally a nice hour to spend with you. And I would like to thank all of you that I have met in the past on a regular basis and also to you as representatives of the financial market. Can only say that generally, I have to treat it kindly. And in all fairness, when it was not fair, we were fighting against it, but it was on a rare occasion for me. But coming now to an end of my duty and service for K plus S, I asked myself for kind of a magic formula. I was very much engaged to bring a legacy of a fuel to life, and we were talking about one hundred years there. On the other hand, we are confronted with the financial market that might have a ten minute of one hundred days, and I would like to have the magic formula between one hundred years and one hundred days together. This would be very helpful for the future. But on the other hand, there will not be any challenge anymore, so we should leave something behind for our successes. Thank you very much, and all the best for you. Thank you. Ladies and gentlemen, thank you for joining today's conference. You may now replace your handsets.