Earnings Call: Q3 2016

Nov 10, 2016

Welcome to the K plus F Conference Call regarding the publication of the financial report Q3 twenty sixteen hosted by Doctor. Burkhard Lohr, CFO. For the duration of the call, you will be on listen only. However, at the end of the call, you will have the opportunity to ask questions. I'm now handing the call over to Doctor. Burkhard Lohr to begin. Please go ahead. Thank you. Ladies and gentlemen, welcome to our Q3 conference call. Thorsten Burkhard and I will answer your questions after a brief presentation. Now let's start with the highlights of another challenging quarter on Slide two. It has been a long time since K and S showed a quarterly loss. MOP prices continued to stabilize in the quarter. However, in a year on year comparison, lower prices have left their mark. On top of this, the limited deep well injection permit caused further production stem cells at our Werra plant. We have made progress on the legacy side. Repair work has started in connection with the recent crystallizer incident. Production of the first tonne is expected in the second quarter of next year. Our salt business is preparing for the upcoming winter season. The bids are mostly concluded with mixed results. All in all, we expect an EBIT one for the full year of 2016 in the range of €200,000,000 to €260,000,000 Now let's go into detail on all of this, starting on Slide three. I mentioned the two main reasons for the negative quarterly EBIT already. We would have shown a positive result even in this tough market environment if our potash unit could have fully produced. The limited permit for our Werra plant has resulted in more than seventy days of partial production standstill with an EBIT impact of about €70,000,000 in the third quarter. This also had an adverse effect on our product mix as our specialties are mainly produced at the Werra site. Subsequently, the average selling price of our business unit potash and magnesium products declined year on year and quarter over quarter. Please turn to Slide four. Our business units sold faced lower de icing volumes in the quarter at lower average prices. High inventories resulting from a mild previous winter had an impact on bid prices and preseason volumes in almost all regions. The biggest impacts are felt in Europe and The U. S. Midwest, which have both faced several mild winters in a row. Nevertheless, our balanced regional presence makes us more robust than our competitors. It puts us into a great position for the upcoming season, and K and S is ready to deliver. And speaking of a great position, our non de icing business continues to make progress with strong brands, helping us maintaining growth in very attractive segments. The Salt business is also making good progress by executing the Salt 2020 strategy. Now let's turn to our Polish business on Slide five. The conclusion of contracts in India and China has stimulated global market demand. The only market in which customers are still a bit reluctant is Europe, but we expect this to change soon. We mentioned in the Q2 call that we believe MOP prices will stabilize, and the third quarter has confirmed that. Our main issue at K and S is that we cannot fully participate in this positive development. The missing volumes from our Werra plant are resulting in lower sales volumes and average pricing because of the product mix effect. SOP prices remain at high levels despite a decline in the quarter. Slide six, please. Legacy remains our flagship project. Despite the incident in July, we are continuing to commission parts that were not affected. We have one of the biggest available cranes in Canada on-site and have started with the removal of damaged equipment. We expect production to start in the second quarter of next year. This should give us the ability to produce up to 700,000 tonnes of MOP next year, and we will reach the 2,000,000 tonnes capacity by the end of twenty seventeen as planned. Looking at the CapEx budget in 'thirteen, we projected CAD4.1 billion, and we were on track to achieve that. Now due to the incident, we will face a moderate increase. But when we look at the amount in euro terms, the budget is unchanged versus 2013 due to a favorable currency development. And now please move to Slide 10. We have already highlighted the limited deep well injection permit as it has left a severe mark on our numbers. What we can say from today's point of view is that the revenue process is ongoing. Production remains challenging as we are dependent on the weather to a large extent. We are still confident that we will find a solution in the near future. But from today's point of view, we can neither predict the outcome nor the timing. Permit procedures have always been part of our business and will continue to be in the future. All of these procedures are complex and occasionally need adjustments or take longer than previously expected. Our road map shows what is on the horizon in the coming years. For example, the application to extend the tailings pile capacity in Khattorf, also part of the Werra plant, is already underway. Also, the construction of the KCF facility is making progress. This will help us to reduce saltwater residues by around 20% from 2018 on. Now please move to our guidance on Slide eight. We have narrowed our EBIT one range by reducing the upper end. We now expect 200,000,000 to €260,000,000 for 2016. The salt business is expected to face a decline after the mild last winter. Our projection is always based on a normalized season. However, in the end, a lot depends on Q4 winter weather, which may even surprise us positively. The main reason for the cut is our potash business. The previous upper end of €300,000,000 for the group assumed a new deep well injection permit in Q4, which we don't have yet. Countermeasures are making good progress. However, the missing permit is expected to cost us around €200,000,000 this year. Now please move to Slide nine. And let me conclude my presentation with our 2020 goal. Our Sol twenty twenty strategy is well on track to delivering an EBITDA of more than €400,000,000 by then. Also, legacy will contribute positively. Today's potash prices make the target very ambitious. However, we still believe this low pricing environment is not sustainable. On top of that, our business units are working on strategic initiatives that will support our goal of €1,600,000,000 EBITDA by 2020. Everybody within the K and S group is very committed to delivering, irrespective of the challenges we are facing right now. Ladies and gentlemen, thank you for your attention, and we will take all your questions now. The first question comes from the line of Jonah Weitz from HSBC. Please go ahead. Yes, hi. Good morning. Thank you for taking my questions. On the first topic I'd like to ask about relates, of course, to your production abilities or capabilities. Assuming that the current conditions that exist now are unchanged for the fourth quarter and for the full year 'seventeen. And also assuming that you implement the truck of and some saline water that you disclosed yesterday, how much potash production or how much potash production do you expect in fourth quarter and in full year 2017, please? Yes. Thank you for the question. When we have put together our guidance for this year, the whole number is 6,100,000 tonnes. We have already assumed that we would be able to use some measures to dispose our wastewaters. And we are very happy that we could announce yesterday that we can use the inactive mine Bergmann St. Hugo. That was an important step because it's a big measure. So that was already built in, in our numbers. So we should end up somewhere around the 6,100,000 tonnes for this year. Yes. And to give you a flavor for what we what one could expect in 'seventeen, of course, there are a lot of unknowns around us still, unfortunately. If we would receive our deep well injection soon, we should be able to fully produce and come back to our 7,000,000 plus volume. But even without a deepwater injection for the whole year 2017, that is not what I expect. I'll just give you difficult scenarios. We would be able to produce more than what we have done in 2016 due to the measures that we are able to use. Unfortunately, due to the fact that there are so many unknowns, and you know even the weather is important for that scenario, we are not able to give you a precise number now, but we hope to be able to do so when we regularly give the guidance for the following year. That means we should be more precise in March. Okay. In terms of the truck and rail, the plan to use truck and rail to dispose or store some of the other wastewater. Could you explain how this will progress when the trucking starts, when the rail starts? And approximately, either on a quarterly basis or an annual basis, how much extra costs that will add to production in 2017? Yes. We will start with the trucking immediately. And we will build a loading facility to be able to start railing the waters to Bertrand Steengugu. That should be done somewhere in in spring next year. And we expect that the total wastewater that we can bring into Bergmann, Stiegen, Grugel will be roughly on the level of the intermediate deep well injection that we have received for 2016, which was seven twenty five million cubic meters. The additional costs are more or less transportation costs only. And we expect here a number between 20,000,000 and €30,000,000 But again, that is all assuming that there is no deep relevancy for the entire year 2017. That is not what we expect, but just to give you a number for this scenario. Right. And 20,000,000 to €30,000,000 is for the entire year on an annual basis? Yes. On the scenario? Yes. Okay. And I guess my last question would be regarding your debt rating, which I understand was recently downgraded junk. And I'm wondering if this impacts your €1,000,000,000 facility, is the availability of cash or the rates you're to have to pay for it? Well, you mentioned by yourself, we have this facility, which is only with a small amount used so far. Due to the change in the rating, we have a slight higher cost on that, but we talk about, I think, 0.5%, still a very cheap very cheap money, if you wish. And we still have the full ability to use the entire CHF 1,000,000,000. No impact at all. And by the way, there is no impact on all the other debt facilities because they have fixed conditions and the change in the rating did not have any impact. And finally, we have no financial covenants at all. So the impact on us is very limited. The next question comes from the line of Stephanie Buffer from Bank of America Merrill Lynch. Please go ahead. Yes. Thank you very much and good morning, everyone. I had one question with regards to your comments earlier on pricing and a second one on CapEx. So you said in your introductory comments that European buyers are still pretty reluctant to accept higher prices on the MOP side. Some of the industry reports that we're reading are actually already talking about price increases of €5 to €10 a tonne. So I want to get a sense of whether or not you had seen any indication of that in your order book thus far in Q4? And related to that, with regards to the deterioration in SOP pricing quarter on quarter, can you give us an indication of whether or not those prices have now stabilized in Q4? And the second question on CapEx. So the CapEx for legacy is expected to remain broadly in line with the previous guidance in euro terms. Can you just tell us what you have actually spent already on legacy and what is still to go in Q4 and 2017 in euro terms? And following on from that, I think previously you've talked about €500,000,000 being the sort of average maintenance level of CapEx for the group. So aside from any incremental CapEx on legacy, should we be factoring in any other additional CapEx over and above around that €500,000,000 mark in 2017? Steph, it's Tofton to answer the first question. The reluctance of European customers we were talking about is mainly related to demand right now. So we see strong demand from Asia. We also see a strong demand from Brazil. But with regard to Europe, customers are right now waiting a little bit before they start buying. We don't expect this to last for long because usually customers start to buy at the November and December. And with regard to pricing, yes, we indeed see a positive development there. But with low demand, you don't have really much of evidence there. When I look at our own pricing, we don't expect any further decline. We even expect an increase in MOP prices also in Europe. Can you repeat the second part of the question, please? Yes, sure. So it was on the SOP side. You comment in the slides that there was a deterioration in prices quarter on quarter. I wanted to understand if that price development has now stabilized. We expect that we found the bottom in SOP pricing as well, and we should see a better market price in the fourth quarter. This usually takes a little bit time until it materializes in our average selling price. But from a market point of view, yes, we have seen a stabilization also there. And then CapEx question is the answer by Birklow. Yes. Many parts of CapEx concerning legacy first, and that gives me the opportunity to again highlight that, yes, we had this incident in Canada. Yes, in terms of Canadian dollars, that means we have a moderate increase of our budget. But we always finance that project in Europe. And as we have a euro balance sheet, the euro view on the project is more important or less important view on it. And due to the favorable currency development and some lucky hedge decisions, we are able to keep the €3,100,000,000 budget, even taking into account the whole impact from the crystallizer incident. We will have roughly another €100,000,000 to spend in this year, in Q4, for legacy and then the final amount, roughly €200,000,000 in 2017. And after we have finished legacy, our run rate CapEx number, which is a bit lower than the €500,000,000 what you have mentioned, is only impacted by further investments in our environment, especially in the Werra area, what we have called the four phases plan that will start in 'eighteen with numbers of roughly €100,000,000 80,000,000 to €100,000,000 annually until 2021. I hope that answers your question. The next question comes from the line of Michael Schafer from Commerzbank. First one is on your outlook for sales volume of 6,100,000.0 tonnes. If given that you have reported 4,400,000.0 tonnes of sales in the nine months, this would imply something like 1,700,000.0 for the fourth quarter, which would be close to a kind of record level on at least significantly above the five years average you recorded over the past years. So wonder where this comfort comes from that you can sell this amount of and where the product comes from basically in the fourth quarter would be my first question. Second one is on OpEx for legacy in third quarter you've booked in there and maybe also what you expect there in the fourth quarter. And then finally, just a clarification on the Bergmannsing flooding exercise. Have you got you have I got it right that basically the amount you can flood there on an annual basis is equivalent to basically the temporary injection permit you've received? And what where would this bring you to? I mean, we talking on an without any kind of permanent permits, would you look for other €400.6500000.0 tonnes of run rate of production in 2017? Okay. I forgot to ask you to ask one question by the other. But I have taken all the three, but I would appreciate if the other questionnaires would be one by one. First of all, yes, 1,700,000 sales in the first quarter is a high number. But we are sure that we will be able, if we have the production and after we have approval for Bergmann's in Google, we should be able to produce the volume. The demand is strong. We could have done more in the first three quarters of this year if only we would have the capacities available. Yes. And that's why we believe the 1,700,000 tonnes in the fourth quarter is doable. To the CapEx numbers, in the third quarter, we had €170,000,000 And I mentioned earlier that there will be another €100,000,000 in Q4. Sorry, I was referring to the OpEx related to legacy. You booked something €22,000,000 in the second quarter. So I haven't found any number here in the report. So just to update us. I give you the expected annual number, and then you can do the math by yourself. It's a bit lower than we have expected previously Due to the incidents, we have shifted some works from 'sixteen into 'seventeen, and we will have roughly €110,000,000 OpEx for legacy for the whole year. Bergmannstegenhuber, yes, I mentioned that we should be able to bring 700,000 cubic meters into that old mine, inactive mine. There's lots of storage capacity so that we can would be able to use it for many years. The only limiting factor is logistics because if you take the 4,000 cubic meters annually by the production days, you would end up with a higher number, but there's a natural or technical limit due to logistics. And I already mentioned the €20,000,000 to €30,000,000 impact on the OpEx related to that. And I'd still be reluctant to give you the number what that means really in production because I said earlier, there are so many impacts. If we are working with this scenario, no further deep well injection, even the weather has an impact. So please allow me just to give you a qualitative answer. It will be more than this year, but it remains to be seen how much it will be in 'seventeen. I have a last follow-up on this permitting issue. There will be a high level meeting politics on the November 21 with Turingia. Is this an event where you expect a kind of breakthrough for the whole issue? Or is this just a kind of informal and there's nothing major to expect from this one? Every meeting is important in that sense and this meeting as well. I would give that too much importance if I would say we expect a break through that day. So I'm not expecting it. But yes, we have made progress. And believe me, it's we are very unhappy not be able to give you a more precise view on that. But that day is most probably not the day where we will receive the permit. The next question comes from the line of Andrew Benson from Citi. I'll just ask them one on one, whatever. The in your last slide, you define the current price of potash as not sustainable. I just wanted to examine your rationale for that comment, please. Yes. That was related to our view on 2020 and that we still believe we could generate €1,600,000,000 EBITDA. Of course, that is based on a set of assumptions, and one very important assumption is the potash price. We would need I think I have mentioned that earlier in other calls, we would need a potash price slightly higher than $300 per tonne. And we are always talking about the reference, meaning MOP GRAN in Brazil. We know that we are not there. That was why I mentioned I don't believe that the current level is sustainable, but because if that would be the case, there would be a gap to the 1,600,000,000.0 which, of course, we would try to close with other measures. But as we have seen a swing, especially in Brazil, especially in Q3, you know that we were trading around $200 and now we are talking about $240 So why should the current status remain until 2020? And I believe a price in that range, the 300,000,000 is not out of range. Okay. On your Slide eight, where you talk about the price and volume and then the missing deep well injection permit, perhaps I'm being a bit thick here, but I thought the absence of volumes caused by the inability to debone inject caused the profit shortfall, and you've incorporated that into the first bar. So can you just explain how you're allocating that EBITDA reduction between the pricevolume and the absence of deep welling? Yes. The first bar is a mix out of the lower prices in the potash business, the effect from the mild winter in the salt business, meaning pressure on the prices and lower volume in the salt business. The second bar is a pure effect, and you're right, that is a volume effect as well, but that is a pure effect from the missing deep well injection in total expected for this year, roughly €200,000,000 All right. Okay. Gas costs have started to creep up in Europe. Is that a factor that could be significant to the outlook for you next year? Are you talking about cost per tonne? Yes. And energy cost. Yes, that's right, yes. Energy costs. Yes. Energy costs are still on a very low level. I assume that this will not change entirely so that we still believe that we will save compared to twenty fifteen double digit percentage on our energy bill in 'sixteen. I hope that covers your question. Yes. No, I understand that in 'sixteen, they're obviously quite a bit lower than 'fifteen. But if in 'seventeen, they're likely to be higher than 'sixteen percent. Well, it looks like it's going to be higher anyway. So I'm wondering how you're absorbing that additional potential cost. No. The yes, it will be marginal, marginally because the most important energy portion is gas, natural gas. And as you know, legacy will start up production. And here, the gas portion will be significant compared to what we have in Germany because we have the solution mine production in Canada. And we have already locked in good parts of our requirement for 2017 due with respective delivery contracts. Okay. And that's for Europe and Canada or just to Canada? Both Europe and Canada. The next question comes from the line of Oliver Schwarz from Warburg Research. Gentlemen, I'll try to walk you through one by one. First one is the given average rate you're guiding to, the 200,000,000 to €260,000,000 on Page eight on your slides. You're assuming an average winter, you're assuming total sales volume of 6,100,000 tonnes, which alludes to 1,700,000 tonnes in Q4. We talked about that earlier on. So what gives you the €200,000,000 what gives you the €260,000,000 Given that you don't expect a permit at the November 21 to be granted, so most likely later than that. So what is the volatility here based upon? Yes. Mr. Schwerfer? That's correct. Schwerfer? Schwerfer, sorry. The biggest swing factor, of course, is still the permission because Hatok is still not running, one of our three minutee sites in the Werra Valley, and that makes a huge difference whether we assume it's not running for the rest of the year or we get the permission today and we can start running it fully. I get that, but I guess your guidance is based on the volume number you gave, 6,100,000 tonnes. So is that 6,100,000 tonnes if you get the permit immediately? Or is that 6,100,000 tonne if that permit is granted by the end of this year? And are we to expect higher volumes if the permit is granted perhaps tomorrow? The 6,100,000 is the I wouldn't say worst case, but the case without a permit. Okay. So that refers to the €200,000,000 then? Yes. Basically, if you say we don't expect a permit anytime soon? More than only this one impact. This is, of course, a dominating impact, but there are more impacts. There could be volatility for the rest of the year. In the currency, the prices are not fixed, etcetera. So don't try to give a precise EBIT number to the 6,100,000 tonnes. I just wanted to know whether that is more closely tied to the upper end or the lower end of the guidance. Because as Mr. Eilshafar said before, the 1,700,000 tonnes is something you haven't achieved very often having a permit in the last couple of years in Q4. So that is a very ambitious number, as you said yourself. And hence, I wanted to know what number refers more likely to the 6,100,000 tonnes or 1,700,000 tonnes in Q4, the upper or the lower end of the guidance? That's basically what If you want to have a qualitative answer, it's closer to the lower end of the range. Okay. Second question, wastewater, I guess you love that topic. The permits the provisional permit you have for deepwater injection runs out by the end of this year. If it isn't renewed and if you don't get permanent permits, I guess that the measures that you unveiled yesterday pumping saline wastewater in Bergmann to Bergmannsagen will just compensate for the amount of wastewater you were able to inject So basically, let's say, worst comps if worst case scenario, you don't get a permanent permit and you don't get a provisional permit, it's most likely we'll see a production number in the ballpark of 2016 also in 2017. Would that be a fair assumption? No. I mentioned earlier that we will be able, even in this scenario, to produce more than in 2016 because Bergmann Ringguh is not the only measure we have. And this alone covers the intermediate permit. We have Schwingen, another inactive mine in Turinia, and we are working on additional measures. So we would be, even in this scenario, able to produce more than 6,100,000 tonnes. Oliver, you know that 2016 has been a very dry year, so more dry as we have expected, what we have especially experienced in the second quarter. And in our expectation, we always expect what we call a hydrological normal year, right? Absolutely. Thank you for that. And my last question is, I think I heard you correctly when you stated that we might see production and legacy already in 2016 of 700,000 tonnes. Is that correct? Did I hear that correctly? If I may correct the year in 2017. Yes, 'seventeen. Okay. Yes. 100,000 tonnes is correct. Yes. So that basically implies that judging from the 1,000,000 tonnes we heard before the incident at Legacy and now the 700,000, that basically the ramp up is expected to be a bit faster than it was originally scheduled if we assume that you can produce from Q2 onwards. Would that be a fair assumption? That is totally correct. And that, if we look a little bit further down the road, could have a slight impact on 'eighteen. We will have the capacity definitely available of 2,000,000 tonnes at the end of 'seventeen. But due to this quicker ramp up, we might have more standstill in 'eighteen than if we would have started at the end of this year. So the production in 'eighteen might be marginally below the 2,000,000 tonnes. But that is still future, but your assumption that we have a quicker and steeper ramp up curve is correct. The next question comes from the line of Markus Mayer from Baader Bank. First question is on the efficiency measures or cost measures. Have you planned any further measures besides the Fit for Future program? That would be the first question. Yes. First of all, thank you for your question. I would like to mention that all our fit measures at the end of this year are sustainable measures. So we have this regain from that positive ideas and implementation of projects for the future. But in addition to that, we have a small double digit million number that we want additionally saved in 'seventeen, 'eighteen and 'nineteen. That is our new midterm planning horizon. The small double digit number is then per year. So every year, additional small double digit number? Yes. Okay. That was the first question. Second question, on Reuters, I saw the news that you expect a decision for this deeper injection permit in the next few weeks. And on Slide seven, I see that you expect prolongation of the variable injects in 2019. Is the difference the temporary permission and the other one the long term permission? Or how can I read this kind of gap in between? No, there was a lot of speculation. And we, by ourselves, have often thought now we are done and we will receive the permit. That's why we have stopped giving any indication. Of course, I have the hope that it is not too far away, but we cannot predict when and if at all. I cannot say more to this chapter, unfortunately. Okay. And then next question would be on the ForEx hedging for next year. Can you give us an indication on the sensitivity and what will happen if U. S. Dollar will weaken, etcetera? Yes. As usual, we have hedged good portions of our U. S. Dollar exposure. It should be in the area of 6070% of our exposure, which is usually roughly CHF 1,000,000,000. It will be more sorry, will be more with legacy, of course, but that is covered by the 60% to 70% as well. And we would have if I can answer that by heart, if the dollar would weaken to 1.2 always compared to 'sixteen, we would lose only roughly €20,000,000 due to the hedges. But we would get good gain if the dollar if we would see parity more than €100,000,000 on that scenario. More than 100,000,000 okay. And then the last question on this €100,000,000 higher Canadian dollar CapEx. As far as I understood, part of this CapEx is might be insured. But can you give us any kind of indication what kind of amount this might be? Or is it too early to say? Yes, I cannot give you a precise number, but I can give you a flavor. Of course, the direct impact, for example, we need a new crystallizer. That, of course, is insured, and that will not be paid by us. And that is not part of the overrun. And again, when we talk about overruns only in Canadian dollars, which is, in a way, a statistical currency because it's euro financed, and we have no overrun in euro terms. And the overrun is then basically due to other contractors which are on the working ground currently writing its bills and you cannot basically do not take up this kind of services, that is the overall Yes. Their performance is lower than expected because we have to change the production patterns, etcetera. That are the indirect costs, which are not covered by the insurance. Of course, we will try to find somebody who takes part of that burden. But for safety reasons, we have put that in the model that in our budget, and that leads to a moderate overrun in Canadian dollar terms. The next question comes from the line of Martin Evans from JPMorgan. Just want to go back to your debt position and the 5x net debt EBITDA and the fact that you said you don't have any covenants. But can you explain what the limitations on your borrowing facilities are in as much as with EBITDA falling sharply and debt going up. Theoretically, trading deteriorates from here and your net debtEBITDA goes up to sort of 6x, I mean, that historically is kind of dangerous level of borrowing, whereby lenders do get very jittery. So what's your fallback position in terms of where you can go to borrow more money urgently if you need to? First of all, as I mentioned earlier, the instruments in place are not affected. Only marginally, the syndicated loan, which means 0.5% higher interest rates on that. And there are a couple of €100,000,000 undrawn in this facility. We will peak that number at the end of this year. We will have lower CapEx next year. And we believe, even with such a high leverage, we would be able, if necessary, to enter the debt markets successfully. And yes, and you always have to take into account that the high debt is a good portion, a major portion of that is our provisions for mining obligations, which will lead to cash outflow in many, many years from now. So and this number, by the way, is impacted by the low discount rate. Yes. And if you really take that into account, you will see that the situation is not nice, but it's not dramatic. Okay. So just finally, therefore, if I mean, if you needed to raise funds, obviously, a rescue rights issue would be answered the question. You said there are other routes, but you wouldn't need to get sort of the government involved at all given the number of jobs in history of the mining industry? You're confident you can self fund without any further external involvement on that front should things deteriorate very rapidly? The next question comes from the line of Patrick Rafaisz from UBS. A couple of questions. The first one, a very simple one on legacy. Assuming the 700,700,000 tonnes, would you say my guess is correct in saying that the EBITDA contribution from legacy would then still be negative at current spot prices in 2017? Yes. Short answer. Good. And then the second question on you mentioned the additional wastewater disposal measures. Can you talk a bit more about what exactly that is? You're mentioning in the report this morning that there's still difficult from a time line perspective, technical tests, permits that need to be obtained. Just a bit more color on that would be very useful. Yes. Two examples we have reported on inactive mines, one in Turinia, one in Lower Saxony. And there are lots of these inactive mines in this area, close to our Werra area, so that there are many opportunities to find further storage opportunities for our selling wastewater and dispose it there. And there are not further used gas caverns, for example, available. We have ideas to further build our further ponds to temporarily store the water that we can then bring into the Werra when the water flow in the Werra is higher due to rain. So a whole package of ideas. We need permissions for every single measure, but we are happy that we have received the two permits already. And segmenting room is a big one because there's a huge volume available for us. And additional measures are on the way. Okay. I mean you've given us quite good details on the Bergmannsvagen impact in terms of what you can dispose there. Can you give us a number for these additional measures in total? How much of that could be realized in a reasonable time frame? No. Unfortunately, because if I be more precise on others who are not permitted currently. I might be forced to tell you next time that was not able. We are now facing other alternatives. The only information that is really important to know for a full production without any impact, we need a deep well injection. But we can do a lot to get more in the normal pattern in 'seventeen with these kind of measures. But please understand that I don't want to be precise on things which are not realized so far. Thank you very much. Thank you. The next question comes from the line of Lisa Denneigh from Liberum. Please go ahead. Hi, good morning. Lisa from Liberum. I just had two questions. First of all, I just wanted to alluded to Stephanie's question on S and P prices. You mentioned you believe they have bottomed. Can you just give me some information on what you're seeing in the market that appears that prices have stabilized? When I look at industry reports, see that prices are still down from the fourth quarter relative to the third quarter. And on top of that, do you believe that the current premium to MOP is sustainable? Or do you expect a strong recovery in MOP prices next year? Yes. I mean, we have seen now three quarters in a row a decline in the SOP prices. And I mean, are talking about a broad mix of different markets. You talk about U. S. Markets, can talk about the Middle East market. You can talk about Europe. Then we have to differentiate between granular and standard, which goes into the NPK industry. And magazines are mostly referring to the top line prices of granular in The U. S. And there, indeed, we haven't seen a stabilization yet, which has also to do with the supplier structure. But when we look at our European markets and what we hear from our customers and from our sales is that we don't believe that prices will go down further in that area. With regard to the premium, I mean, this answers also the question with regard to the premium to MOP. I mean we don't like to think too much into MOP premiums because we are not a Mannheim process producer, so the premium is less important to us. We look at absolute prices, and they are still on a high level. And mean, MOP prices have stabilized, as we said, as well. And this indicates that the premium will be sustainable. Okay, thank you very much. And then just a quick second question. So unsurprisingly, average operating costs have been quite a bit higher this quarter. And my rough calculation points to value of €278 a tonne versus €249 in the same quarter last year. Obviously, this is due to lower production volumes affecting fixed costs spreading out over lower volumes. But I just wanted to understand what the spread or if you could give some split between how much is due to debt and how much is due to higher legacy start up costs or any other elements I'm maybe missing out on? Well, the majority comes from the operating leverage. And the incremental legacy costs are €11,000,000 The next question comes from the line of Jeremy from Bernstein. Please go ahead. Hi. It's Jeremy Radinius from Bernstein. Thanks for taking the question. Just coming back to the question about the long term potash price that you envisioned. I guess I think about the long term potash pricing industry is kind of more determined by the economics of the industry rather than your specific profitability or the 2020 target. So I would think that long run pot like very long run potash prices, MOP prices are determined by the cost you need to incentivize new capacity to the market. So first, I just want to check that logic with you. And secondly, would you have a value that you would put on the price of potash you think that needs to be needed in the long run to attract new capacity? Yes. Of course, there are a lot of impacts on long term prices, but I believe we are in an oligopoly. And even if we should have one or two more market entries, it still ends up in a real oligopoly. And in oligopolies, prices do not tend to develop too marginal costs. And if you see what happened this year, when prices were still a bit away from marginal costs, every competitor did the utmost to participate in a market where volume where price is more important than volume and capacities were not fully utilized. And if you, in a way, expect that this continues to be the case in the market, and that was my message earlier, dollars 300 price should not be completely out of range for the year 2020. I know that it's a philosophical question, there are so many opinions on that, but that is my view in a brief, very brief speech. I understand your observations, and I would tend to agree. But I guess I'm just looking at those. How do we know $300 is the right number? $300 per tonne enough to get companies to reinvest to continue to build so that the market remains supplied long term? Or would a number lower than that work? No, with $300 don't get me wrong, I did not say that $300 is the price I expect for 2020, but that would be the price that we need to achieve our €1,600,000,000 EBITDA goal. I'm not giving a guidance, but I'm saying 300,000,000 is not out of range. But 300,000,000 would definitely not be sufficient for additional capacities. Therefore, I can't believe that any investment case would deliver a positive NPV on the assumption that $300 is a long term price. And what price do you think it would need to be then if higher than that? You would need to have a price starting with a 4. Okay. Great. So because I've estimated between $250,000,000 and $325,000,000 but it sounds like you would think higher than that. Great. Of course, it depends on the investment. Are we talking about brownfield or greenfield, etcetera? But I was more thinking about a greenfield project, and I cannot imagine that this could be economical with a price below 400,000,000 The last question comes from the line of Javier Kastain from Please go ahead. Hi. First of all, many thanks for taking my questions. And my first question would be, and I think it has already been asked, but on a I would like to look at it on a different way. So on a per metric ton basis, what would be the cost next quarter and for the entire fiscal year 2017 when it comes to all these measures that you are implementing in relation to the production problems that you have at the Werra plant. So unless if you don't mind distinguishing between, so OpEx per metric ton and then we can if you could again tell us what the CapEx is going to be in relation to, for example, crystallizer and all the measures. Yes. Mean, Javik, when we would be able to produce fully, and I leave out legacy right now because we said that legacy's contribution next year will still be negative on the EBIT level and also on EBITDA level. So when we would when we only look at Germany and we could produce fully, we wouldn't need to use our additional measures. So this would avoid this extra cost. And thanks to the cost saving measures we have initiated, we would be at a level which we have previously always expected for 'sixteen, which was around 200 between $2.10 and €220 per ton. We won't, of course, achieve that if the full production is not possible next year. Got it. But just a quick very quick follow-up. So you're saying that independently of deforestation cost going up because of all the selling wastewater being taken from one part of Germany to another part of Germany plus other measures that you had been implementing right now, your production cost is going to stay at the same level on a per metric ton basis? Yes, mean, these measures and also assuming that when we have to implement those measures and use those measures, we cannot produce fully, then you will see a number which is, of course, higher than that. And we said earlier that Bergmann's thing alone cost us between 20,000,000 and €30,000,000 next year if we're to use it fully. So this gives you an indication. It's just that the former CFO, something like a month ago, was in London for a management presentation, and he indicated €30 per metric ton in relation to all those measures. The former CFO of which company? Sorry. Well, the former CEO, sorry. Are you still CEO? Mr. Steiner is still CEO. Yes, yes. Okay. So part of the management team was in London, and they indicated that. So that's why it was a bit I couldn't really reconcile what you were saying today that production costs are going to stay at the same level when everything that is going on at the Berrien plant? I suggest the following. Why don't we go through it again offline? Sure. So give us a call after the call. And then in relation to CapEx? Can you repeat that question, please? Sure. So the first question was in relation to OpEx, but then when it comes to CapEx for this coming quarter and then next year, for all these measures that you implement at the Werra plant? CapEx is only a very low number. We will have a very low double digit number for all the measures that we can imagine in 2017. It's more a question of additional OpEx due to transportation. Got it. And my second question would be around your and I guess, second, around the fact that you note around the sustainability of current MLP prices. And it's just that since to me that given that corn inventories are at historical levels and then Canpotex is increasing capacity next year, you're also increasing capacity next year. So it seems that doesn't really it's not really consistent to say that prices are not sustainable when you yourself have been bringing capacity next year, right? And again, crop inventories are at historical levels. So I just wanted to get your view on kind of like how do you think about the fact that complexity is giving capacity again and you're increasing capacity, and I feel prices will go up. Yes. First of all, we are expecting it's not completely ruled out that there will be a demand increase for 'seventeen. We will only have additional 700,000 tonnes from legacy in 2017. And again, we have seen the behavior of all participants in the market to not fully run the capacity and to prove that price over volume is the right strategy in the market. And by the way, now you could argue, yes, but you're running full capacity, which is available. We always said legacy with the solution mine concept is so variable and so flexible that we, if necessary, we would participate in such behavior as well. So we have seen historical developments of prices, and we believe and that is not only our view. Think that it's a common sense in the market that the bottom the bottoming of is behind us, and then there will be a slow but continuous positive development. That is our expectation. Okay. Understood. And then my last question, and I guess it goes along the lines of what you just said that you could potentially think about not producing at full capacity in legacy, which given your level of leverage, could be a bit dangerous. But I guess this is scenario and my question is that this is a scenario in which there's no permit for the Werra plant. Costs are higher because of those transportation costs that we talked about before. There's no visibility around timing. Potash markets could stay where they are or even SOP premiums come down. And then again your plants are producing those that are producing that SOP are running at a higher cost than in the past. The ice and salt demand is they saw this winter because of what we know about inventory, legacy ramp up takes a bit longer or even if it is as it is, it's already delayed. So and just my question is, under that scenario that I don't see I see that actually quite likely, The moving answer in which you it's not that you may run out of liquidity, but you may be close given that cash balance, for example, is 130 basis last quarter, euros 300,000,000. So in that scenario, could you tap the equity market and could you go for an equity raise? Or would you continue just raising debt? I said earlier that, first of all, there are a lot of €100,000,000 available from our facility which is in place. And in addition to that, a BB plus rated company is still able to enter the debt markets. And if that would be necessary, and you have put together a lot of assumptions, I have a more positive view on the future, but nevertheless, let's talk about that. If necessary, we would be able to enter the debt market. I'm not seeing any equity measures due to liquidity constraints. Many thanks. Thank you very much. Thank you. I will now hand back to Doctor. Lohr for the conclusion of the call. Please go ahead. Yes. I would like to thank you all for joining us today. Yes, obviously, 2016 is challenging year for us, but I hope that we gave you some flavor that we are not too pessimistic for the future. And especially legacy will make a big difference for the company starting second quarter next year. And if you have further questions, please call Investor Relations. And I'm looking forward to see you soon again. Bye bye. Thank you. That will conclude today's conference call. Thank you for your participation, and have a pleasant day.