Earnings Call: Q1 2016

May 10, 2016

Welcome to the K plus S Conference Call regarding the publication of the financial report Q1 twenty sixteen hosted by Doctor. Borcutt Law, 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. Borchard Bloh to begin. Please go ahead. Thank you very much. Ladies and gentlemen, welcome to our Q1 twenty sixteen conference call. As always, I'm joined here by our Head of Finance and Accounting, Jorg Bettenhausen and our Head of IR, Thorsten Wilkerson. As you may have seen, we have streamlined our reporting package. Deutsche Borse now allows for less formal quarterly reporting in Q1 and Q3. This gives us the opportunity to provide you with a package that is more designed to your needs. IR highly appreciate any feedback you may have on this. Let's have a look at the highlight of the quarter on Slide two. Our two pillar strategy has shown again that it works. Despite a mild winter, our salt business contributed strongly to the Q1 results. In the potash business, our colleagues were busy managing the production by only having a limited deep well injection permit for the daratide. So far, the impact of temporary production outages was limited. We continue to expect that it will receive that we will receive the long term permit by summer this year. Our projects, namely Legacy and Fall twenty twenty, are well on track, and also the cost discipline in the group remains high. We have just concluded the issuance of a Schuldschein with a total volume of €600,000,000 at very attractive interest rates. This underpins the trust of investors and strengthens our balance sheet to support the further strategic development of K and S. Despite potash prices in overseas markets continue to stabilize, we keep our 2016 outlook unchanged. And now please turn to Slide three. We have guided for significantly lower operating results in 2016 just a few weeks ago, the first three months confirmed our cautious view. Lower average selling prices in potash and less sales volumes in both business units led to a 31% EBIT one decline to €218,000,000 Our business unit sales held up well despite a mild winter. We could achieve an overall small margin increase, thanks to product mix effects, our ability to leverage on our strong brands and due to cost savings. The strong decline in potash earnings is mainly due to significantly lower prices in Brazil. Our core markets in Europe remained robust. Also, our specialty business still contributes strongly. I mentioned earlier that the cost discipline remained high. A very good example is our potash business, which decreased its cost per tonne from EUR212 to EUR201 million. The progress we made is due to our Fit for the Future measures. Also, lower energy costs and freight rates contributed to this effect. You know we calculate cost per ton like this. We look at revenues minus EBIT over volume and adjust this for the legacy OpEx. So this number is even more impressive when we keep in mind that Q1 'sixteen had about 13% lower sales volumes. Let's have a look at the progress of our legacy projects on Slide four. Legacy continues to make good progress. We have now invested around 90% of the CAD4.1 billion budget. During the quarter, we focused on the production facilities. Also first rail tracks were built to connect the site with Canadian Pacific's network to transport our potash to Vancouver. The construction of the port facility there is also well underway. The project remains on track for commissioning this summer and to produce the first tonne of potash by the end of this year. And now please turn to Slide five. We told you in our Q4 'fifteen conference call a few weeks ago that we saw first sensitive signs of improvement in the potash markets. This continues as prices in overseas markets for MOP have shown stability for a number of weeks now. It gives us confidence that we have seen the bottom. While the markets are still waiting for direction, especially from China, we have seen trading activity picking up slowly. We had volume wise a slow start into the year, and this mainly affected our specialties. There was good buying activity from customers in Europe by the end of twenty fifteen. Moreover, the season started here about four weeks later than last year. Prices in our European core markets are robust. Also prices for our specialties remain on a healthy level. And now please turn to Slide six. While our Salt business experienced a revenue and volume decline, we were able to improve our EBIT margin slightly from 19.5% to 20.6% in the first quarter. Our Salt unit provides stability despite a volatile winter business. Our ability to leverage our strong brands in The Americas contributed in the non deicing area. The deicing business, on the other hand, was faced with a challenge of a mild winter on both sides of The Atlantic throughout the season. However, I want to stress again that we managed this pretty well and still delivered a decent Q1 EBIT with €123,000,000 Our efforts regarding the Sol 2020 strategy, which aim for an EBIT of more than €250,000,000 under normal winter conditions, are well on track. Now please turn to the outlook on Slide seven. We have kept our assumptions unchanged compared to a few weeks ago, although we are seeing a stabilization of overseas potash prices, we stick to our outlook for 2016. Soft commodity prices remain low and will, together with continued strong competition, lead to significantly lower average selling prices compared to last year. The fact that we are still working on the limited permits for deep well injection makes us especially cautious. We continue to expect the long term permit for summer this year. The Q1 impact was very small. However, we are now approaching spring, which is usually drier than wintertime, and thus further outages at the Werra plant cannot be excluded. Our Salt business is faced with higher inventories left in the system after a mild winter season, and production is being adjusted accordingly. We are doing our utmost to further improve profitability of the business. However, lower de icing sales volumes for the upcoming season cannot be ruled out. All in all, we stick to our qualitative guidance of significantly lower operating results for the full year 2016. Allow me a few midterm perspective we are seeing for the group before we open the line for questions. Please turn to Slide eight. We still believe that the current turmoil in the potash market is not sustainable and that midterm fundamentals remain intact. Our legacy project will give our earnings a boost. In addition, the progress we are making with Sol twenty twenty and the ongoing cost discipline makes us confident that our EBITDA goal of €1,600,000,000 by 2020 remains realistic. We are working hard on the various items of our management agenda, which will bring K and S back into cash. Ladies and gentlemen, thank you for your patience. We are now ready to answer your questions. The first question comes from the line of Lutz Grutzen from Commerzbank. The first one is on potash. The excellent unit cost per tonne of $2.00 €1 per tonne. Would you consider that as sustainable at least for second and third quarter as long as legacy is not starting producing? The second question on potash is Can we do it as usual one by one? Sure. Sorry. Thank you very much. Yes, first of all, we are very happy about the outcome of the first quarter in terms of cost per tonne. I mentioned that this was an effect of Fit for the Future, of course, energy and freight costs as well. But the development over the following quarters will, of course, be affected by the volume, and that, again, is affected by the development on our Werra side. So I cannot give you guidance for that, but we should not expect to remain that number on the current low level. The guidance you had given earlier regarding the Werra issue and the environmental outages is that you set a low double digit million euro amount might be the effect for the full year. Is this right? That is still our view on that, yes. Okay. Second question then on the Canadian fires. I know that your part is far away from the fires, but any impact on the infrastructure you needed on that issue? I expected this question for this call. That's why I called our project manager, Ulf Lam, yesterday. There's no effect, not currently and not expected. Okay. And finally, on the salt, on the non de icing salt, here the average selling price of CHF 121,500,000.0 is nicely up. Would you consider that as sustainable given the improved product mix? Or was there a one off impact in Q1? Yes. The strong price development in the non de icing sector is more or less a sustainable development. Of course, there might be smaller hiccups, but we see a nice and strong development that should not turn into another direction. Okay. Thank you very much. You're welcome. The next question comes from the line of Jonas Weitz from HSBC. Please go ahead. Yes. Hi. Good morning and thank you for taking my questions. The first would be, I guess, on Brazil. Could you give a bit more color on your the markets that you're seeing on Brazil and the types of sales that you made to Brazil? Did you reduce any sales volumes to Brazil in the first quarter because of very low prices there? It was a bit difficult to understand, but I guess I got the question and give you the answer. If that was not precisely what you wanted to know, please ask again. Yes, Brazil is definitely the weakest market currently, and we are very happy that we have the stabilizing European business in both terms, in volume terms and in price terms. In Brazil, I guess you followed that we were even below $230 $220 per tonne. But we have seen, as I mentioned in my speech, bottoming the price, it came back. Now the last week, there were some transactions again with a lower price. So it is a bit volatile, but we believe and our salespeople who are the closest in the market believe that we have seen the bottom in that market. What that means for the further development, where we see a strong pickup, volumes are great in Brazil in the first quarter and have been in April as well. So it's not a the demand, obviously, is not a problem. It's the mechanism of pricing, I would like to call it. And as everybody every player in the market is having an eye on that and is doing the utmost to support a healthy price, we should see a recovery. Okay. But did you sell any less volumes? Or did you cut any shipments to Brazil in the first quarter because of low prices there? We are a bit more cautious, of course, with sales in this area with the lowest prices. But we also have the limited production, as you know. And so we, of course, serve the European markets first. So it's a mix out of different reasons why we were a bit behind volume wise overseas. Okay. And with regards to the European markets, I mean, the price the quoted prices in Europe seem to be extremely high compared to the rest of the world. Do you see any first crack in that in the European prices converging lower with the rest of the world? Yes. We have always said that the European market is less volatile. So when prices overseas go up, it doesn't follow one by one, and it's the same in the other direction. Luckily for us, because it's our home market, the price that you can see is, of course, a mix mix out of different products. I would say we cannot 100% decouple of what's going on in overseas, but it's very the development is robust, and we expect it to remain robust. Okay. With regards to the soft disposal issue on the potash side, what I mean from all this all the issues that you're facing at the moment, could we expect that you would have to spend some more CapEx or some significant more CapEx to find a way to reach proper disposal procedures for the saltwater? We have always disclosed the number of another €400,000,000 for the so called four phase plan, which is not one by one exactly what was agreed on, but we are not seeing significant additional CapEx for changes on that plan. With the CHF 400,000,000, you are still on the safe side. And as I hope you remember that this we are talking about a very long time for spending this money. So it's annually, it's number only double digit million. Okay. I guess the last question to ask would be on the Salt business. Deicing Salt volumes were very, very low, but it seemed that the price barely moved compared to the first quarter twenty fifteen. With all the excess inventory, with the warm winter in the past two quarters, I mean, that seems a bit counterintuitive. Could you give more color or more kind of detail on how demand is disappearing that prices are staying the same? Yes, you're correct. The prices in the first quarter were on the good and high level that we have agreed in the winter in the late summer twenty fifteen for that last winter season. So there were not many prices renegotiated due to the situation. That's why we had this solid pricing. What the pricing will look like in the next season remains to be seen. We expect lower volumes, but not necessarily lower prices. That, of course, depends on the discipline of the bidders in this individual bid. Right. Generally, we can just say that lower demand would translate into sometimes lower prices? It sounds logical, but it doesn't have to be this way because we are talking about hundreds of different bids, and it depends on the discipline of the bidders. So I wouldn't dare to give you guidance here. The next question comes from the line of Jeremy from Bernstein. Please go ahead. Hi. It's Jeremy Rodenius from Bernstein. Thanks for taking two questions. Firstly, on I'm just asking about the lower cost in potash in a slightly different way. I'm just, again, wondering about the sustainability. Instead of talking about them in terms of unit cost per tonne, could you talk about them a little bit more in absolute terms? So for example, would in absolute terms, in euro, would personnel costs be down year over year, same with energy, freight, etcetera? Jeremy, it's Tostfner. Know that we tend not to break the single cost items down, but I think you have really touched the cost lines that contributed most, except for the Fit for the Future affected cost lines, which are across all lines actually. We have seen good decline in Q1 year over year in both Freight and Energy. But again, we're not going to lay out concrete numbers then. Must be like lower maintenance or deferred maintenance an aspect of it as well? No. This was not an effect. Okay. And then secondly, just observing that potash prices in Europe, your realized potash prices in Europe are up quarter over quarter and also year over year despite some of the benchmarks being down in Europe. Could you talk about how you achieved that, please? Yes. Again, we always said Europe is a very stable market, but this is more or less a product mix effect. We are not 100% decoupled from the development in overseas markets. So we have seen product wise kind of slight effect. But as we have product change and that is not the same quarter over quarter in every year, this year, for example, we had a later application season starting that means directly an effect in our product mix. So slight effect on the prices if you look product by product. But due to the mix, we see this nice development that the European prices are even slightly up quarter over quarter. And so were SOP or specialties volumes still good in Q1? Because I remember you saying like they were abnormally good in Q4. SOP in Europe, when we still talk about Europe, was good in Q1 in both ways, volume and price. We had lower volumes in overseas. But SOP also is affected by our Werra side, which means we have increased slightly our stocks because we have to be a bit more cautious not knowing what's going to happen when it's getting drier. So that you'll still have SOP to sell during the summer? To be able to sell SOP in the summer even when we are short in production. Great. Okay, very good. Thank you very much. You're welcome. The next question comes from the line of Sophie Jordiard from Liberum. Please go ahead. Good morning and thank you. The first question I've got is just around customer inventory levels. If you could give us an idea of how you see those in both the salt and potash business versus, I guess, this time last year or some sort of quarterly normal quarterly level? And that's the first question. Okay. Yes. There's a bit of guessing because there are there's no statistics besides The U. S, which is not yet our market, no statistics about inventory levels. But the two business units showed two different developments. Of course, the Salt business, the season ended with high inventories in the customer stocks and in our stocks. So we will reduce over the summer the production a bit to not produce overcapacity for the next season. So inventories in both sides of the Atlantic are on a quite high level. That's why we guided we might see lower volumes. But again, it does not necessarily affect the prices. In potash, we haven't seen high inventories for quite a while because there is the tendency to keep the stocks low because of the high volatility of the prices. That's one reason for that. We are not expecting to have too much in the system. Thank you. And then the second question, just a number question really. Could you just remind me how you expect your depreciation and amortization to evolve during this year and if possible into next? I'm thinking particularly as legacy starts operations. Yes. Sophie, I think we have we can stick to the number we have given out in the Q4 conference call. We saw in 2015, G and A of EUR $275,000,000 for the group. And we said that we expect this number to increase by EUR 25,000,000 to EUR 30,000,000 for 2016. We see at the end of this year, the legacy DNA starting to materialize, which is only for a couple of weeks. So it's not the total DNA yet, but this will, of course, be then in full effect for next year. So we will see a significant increase in DNA in 2017 because of the legacy project mainly. And could you help us quantify that in any way? Well, I think we said last time that the legacy DNA for this year for about one month represents about EUR 10,000,000 to EUR 15,000,000 and if you take this for a full year. Great. Thank you very much. The next question comes from the line of Christian Kaitz from Kepler Cheuvreux. Please go ahead. Yes, good morning gentlemen. Two questions, if I may. First question would be with the overly wet conditions in Europe dominating the first quarter. Do you see a catch up potential during Q2? And then actually related to Q2, is there any negative influence from a cold April, which, for example, the plant protection companies are complaining about. So maybe you can lose that a bit, and then I'll ask my second question later. Yes, Mr. Thank you for the question. Yes, we should expect a catch up kind of catch up in the following quarters. But unfortunately, we have a limiting factor to participate here. When we see a drier second quarter, this means lower production. So it remains to be seen what this means for K and S. But generally, we should see that, and we don't see that we don't expect that the weather conditions in April have a significant impact on our business. Okay. Great. And then the second question actually related to Sophie's question earlier. In Salt, can you give us an idea how the inventory situation at your customers is for de icing salt? And in that respect, is Q3 going to be a low quarter in terms of early stocking into the next season? Yes. I can only give you, as I said earlier, a qualitative impact that we are facing high inventories. And yes, that means lower volumes early stocking in, in the third quarter. So that will affect us, definitely. Okay. But the like, for example, the inventories which were or are at the municipalities are not being bought back, so they're staying with the municipalities for the year? No, no, no. They keep it, and they could keep it for more than only one season. We don't hope so, but that could happen. Okay, great. Thank you. Yes, you're welcome. The next question comes from the line of Paul Walsh from Morgan Stanley. Please go ahead. Yes, good morning, guys. Thanks very much for taking my questions. I'll just give them one by one. I'm afraid the focus is on P and P as well. Pricing, if I look at European granular prices, they've clearly come down by somewhere in the order of magnitude of €50 €40 a ton over recent weeks. Are you saying that you can maintain ASP in Europe in Q2 versus Q1, I. E, the premium that goes up because of mix? Or are you going to feel some impact from the weaker trajectory we've seen more recently in European MOP prices? That's my first question, please. Paul, it's Dostochner. Yes, I mean, the thing is about where do you look at. It. I mean when you recall K and S' European business, we do the biggest chunk of our business in a couple of core markets where we serve more than Saudi customers. So it's a rather fragmented market with small order lots. Where we have seen prices being relatively stable. When you look at the overall European price and especially in coastal regions, there we have indeed seen a decline in pricing, which is explained with always having been their competition, be it from Russia and sometimes also from America. And sorry, does that mean you expect ASP in Europe to be down in Q2 versus Q1 or not? Sorry. Well, as Doctor. Law said earlier, Europe cannot decouple from the overall price development, but it will relatively be more robust than, for example, the Brazilian market. But of course, we cannot exclude that we will obviously see this year. Please don't force into a guidance. No, no, sorry, didn't mean to do that. Want to serve in some of the team. No, no, absolutely. I didn't mean to do that. It was just to understand sort of how much of your production was sort of linked to maybe some of that pricing data versus how much is more resilient. But you've made that clear. In terms of the volume developments, I mean, the flow rates we can see in the wearer are pretty low at the moment. And I'm just curious as to when you feel that might knock into further production curtailments until you secure the permits in the summer. Yes. As we speak, we have the effect already. We are working short at the Werra because the water flow is too low. There's no rain for the next couple of days expected here. So but that was we knew that May would deliver other weather patterns than the first quarter. So we are still in line with our expectations. So when we receive our longer lasting permits by summer, which could be fine with what we have expected for this year. Okay, fine. And are you able to give us a sense for how much production is currently offline? In terms of volume or Well, I think you made an announcement at the April for a few days about which sites were impacted and so on. Of course, you can't be expected to do that every time you have to reduce output. But I just wondered if because you said no impact on volumes in Q1. I'm just wondering what the volume impact could be in Q2. Yes, Paul, it's very, very tough to break that down quarter by quarter because we do not know really for how long this situation will last. It's something pretty dry. So upstream are two of the three sites, which belong to the Werra plant in Sartorf and Lisbon Der Balsbach. The three plants of the Werra site stand for 45% of our total production capacity year round, which means when only two of these sites are currently not in operation, It's, of course, tough to calculate what does it mean for just a couple of days where we do not even know how many days the situation will last. And you also have to take into account that this is production. It does not necessarily mean that this transfer translates one by one into sales volume because we have, for cautious reasons, increased our stock a little bit. Okay. That's very clear. Sorry, one last question, if I can. So just thinking about the overall pricing and volume developments as we move through the rest of this year, it feels with Europe edging down a bit, overseas stabilizing, sequentially flat from my data at the moment. Volumes, I guess, later start to the European season, but are we looking at a scenario where volume declines will be more or less similar in Q2 to Q1 in terms of year on year? No, no. We guided that we expect lower volumes than last year. But again, for the I'm talking about the full year 2016. Impacted by the Werra, the expectation for the worldwide demand is fairly strong and promising, only slightly below last year. So no I would without our Alvera issue, we would not expect these lower volumes in total. Okay. That's good. Yes. Okay. That's helpful, guys. Thank you very much. You're welcome. The next question comes from the line of Peter McKay from Exane BNP Paribas. Please go ahead. Yes. Good morning, everybody. I've got three or four questions. Apologies. I'll try and whiz through them. Going back to Jeremy's question about the European average potash price. I'm still a little bit stumped here. You say that you can't decouple from what's going on in global prices, but suggest that the first quarter number effectively did. And the comments that you've been making suggest that the mix was weaker in Q1 than it was in Q4 when you had, as Jeremy pointed out, some exceptionally high sales of specialty. So again, I just want to press you on mix effects and some of if you can just talk about some of the product areas in PMP that explain that have buoyed up the average share price in PMP, please. Peter, we had I mean, when you look at the European average selling price, it was more or less stable year over year in the quarter. We have seen we were able still on the specialty side to get in favorable SOP prices in Europe. We have seen our Korn Fali product to be very stable. But volume wise, we had a favorable mix towards SOP. And this was the positive mix effect we were talking about in the first quarter. This was unfortunately offset by the MOP price development. And this is what we sell, as I said earlier, mostly into coastal regions where the competition is higher than it is in our core market. Okay, perfect. So that sounds like the big decline that you had in specialty fertilizers at the group level, that was almost entirely the overseas market. Yes. Is that Okay. Next question, just to touch on SOP. Can you make any comments what you're seeing in the SOP markets? We've obviously seen some slightly more cautious commentary from some of your competitors in the SOP market just very recently. Are you seeing any change in trend at all? I wouldn't call it a change in trend. But again, it's true for SOP as well, what we said earlier for other products. Of course, we feel that there's a bit of a turmoil in the Polish market generally. We see lower volumes overseas, but a strong demand in Europe. And prices are still on a high level, especially the premiums are even a bit higher than they were due to the low MOP prices. So I wouldn't call it a change in the trend of the SOP business. Are you seeing any narrowing of that premium, Tore? You're absolutely right. I mean we've seen it's been going up in a straight line. Just wondering if you're seeing any stabilization of that at the moment, I. E, SOP pricing starting to come down? If you only look at the premium and health car, it did not come down. No. So still very stable. Okay. And then I've got two questions on SALT, if I can, please. It sounds as if you are your message around pricing has changed a little bit about in salt. So last time, at the fourth quarter, you were talking about the inventory situation in deicing leading to a tendency towards lower pricing in the non deicing business. Yet now you sound a lot more optimistic both about potentially about deicing prices in the next contract round, but particularly about non deicing salt prices. Has something changed that makes you feel a little bit more comfortable that things are sustainable there, please? Not really, not really. It's always difficult to give a general answer because it's a very local business. And for example, the non deicing salt prices in North America are more impacted by the deicing business than this is the case in Europe. But as we have seen a very strong development in the non de icing business, we believe that this is a sustainable development. There might be a weaker quarter, but again, this is in the Mining business not really something we should overestimate. And of course, what happens in the de icing business, we really don't know, and we don't want to be too bearish because volumes will go down. There will be more competition, but that does not necessarily mean that we will see a strong decline in pricing. So tremendously seen. Okay. And just last question is actually on salt costs. If I look at cost per tonne in the salt business, there's hardly any increase year on year despite a big mix away from deicing towards industrial. Can you talk about some of the cost items within the salt business, please? Sure. That's even more difficult because we are talking, in Polish, about six German sites and in future the Canadian sites, but we talk about a very high number of sites in our Polish business with very different cost per ton items. If you, for example, take Chile, we have a single digit dollar cost per ton. And we have, of course, completely different cost per ton here in our German sites. So it's really difficult to elaborate on that, especially on such a call. But the numbers are quite stable. They are not as volatile as, for example, our Polish numbers. They are more Polish business, more energy intensive, especially gas. And that the energy bill in the Salt business is by far lower. Only sorry, only a qualitative answer, but it's difficult to be more precise on that in that call. No, entirely understand. But basically, we shouldn't think that there's anything unusual going on within SALT over and above the SALT 2020 program? Absolutely not. The next question comes from the line of Thomas Wigglesworth from Citi. It's actually Andrew Benson, but Tom's on the line as well. Couple of questions. And I may just have completely missed this, but with the legacy project, are there any start up sort of one off start up costs this year and possibly next year that are kind of definable? I mean, for example, BASF is indicating around EUR 200,000,000 of start up costs, which won't recur that will adversely impact EBIT this year. Yes. The OpEx it's not only start up costs. We have running OpEx costs, including the start up of 110,000,000 to €120,000,000 for 2016. So then you have the total cost bill for legacy for this year. All right. So that's effectively the how much of those would be sort of ongoing? And how much would be kind of off spec material that you have to kind of get rid of or did you get off spec material potash? Don't know. But is effectively a recurring OpEx, which will then be offset by sales and volumes? Yes. Yes. We stopped guiding OpEx costs from 2017 on because then it's not a project any longer at the site with sales and costs. And we expect and I'm happy to confirm that already breakeven EBITDA an EBITDA level for 2017. Of course, that is due to the development of the market price, clear, but so we are not talking about the OpEx number only for 2017. Okay. And can you provide a little bit more color on the river basin issues that you've talked about in your salt reduction master plans, not all of those. I mean, you're hoping for a long term, you like, discharge approval. Is the apart from the water levels, what is the challenge? I mean, are there any long term constraints on underground? If you just could provide a little bit more color so I can understand what's going on there and what the constraints are for the business in the long term. Yes. Currently, have two permits to handle our residues, production saltwater residues. We can put a special quantity directly into the Werra, and we have the so called deep well injection. We press it into the underground. And we have currently not the permit that we expected until 2021 to use this methodology to press it into the underground. And we only have a short term and limited permission, which forces us to reduce production if there's not enough water flow in the Werra to use the other methods to get rid of this salt water. And when we look at this long term, because we will overcome this year, we will get the permit for until 2021. And we have agreed with the politics on a way to handle this in the future without deep well injection. So that would then be the last permit that we need. And therefore, we would have to invest another €400,000,000 That's a package out of a pipeline covering our stockpiles, etcetera. So we are talking about quite long time for investing that money. So that means we only have small portions out of the CHF 400,000,000 affecting our CapEx. All right. I see. And if it started raining like mad today and within a very short period of time, there were no further constraints. What do you estimate that so far this year is the level of lost production? Yes. Let us we only gave the indication that if we receive the long term permits in summer this year, that is what we expect and that is what is indicated, we would use, EBIT wise, a lower double digit amount. We cannot be more precise on that. That really depends on weather, etcetera, and what is the best way to drive our sites at Hedera. So please understand that we only give this indication. Okay. So if I can understand what that is, you're saying that the worst case based on the scenarios you believe are highly likely is less than 100,000 tonnes of lost production? No, I said I didn't use the word worst case. I said if we receive the permit in summer this year, we would use a small double digit average amount. Right, right. Okay. Brilliant. Thank you very much. You're welcome. The next question comes from the line of Oliver Schwarz from Warburg Research. Please go ahead. Good morning, gentlemen. Thank you for taking my questions. Firstly, just for confirmation, have there been any orders in Q1 that you were not able to fulfill due to the production problems at your Werra site? Or have you been able to handle that via inventory levels? We were able to fulfill every obligation. And by the way, I think I mentioned that earlier, we have increased our inventory a little bit to be able to do that in the future as well. Okay, perfect. To my calculations, you spent like EUR 17,000,000 in OpEx for legacy in Q1. Would I be correct to assume that the EUR 100,000,000 to EUR 120,000,000 to 120,000,000 of start up costs and OpEx in legacy would be rather back end loaded than front end loaded? Yes. It's back end loaded because commissioning starts in summer this year, and that is linked to higher OpEx numbers. Right. And now to something a bit more complex, I have to admit. Coming back to what you said about mix effects, volumes effects in the potash part of your business. In the presentation, you stated that there were prebuying effects in specialties, that's Page five of the presentation, pre buying effects of specialties in Europe in December. However, you stated that the price decline, especially in the overseas market, was mainly a function of lower, if I get you correctly at least, was a function of a lower percentage of specialties going into the overseas market, while Europe was more or less on a steady level, which implies to me, given prebuying in December and good business or, let's say, average business in Q1, that farmers are applying more specialties or more SOP specialties to their produce. Is that so? And if so, why? Yes. You have also taken into account that the total volume was down. So basically, you sold lower specialties in Europe as well. But because No. In the mix in the mix, the portion of SOP is higher than it was in the first quarter of twenty fifteen. Overall So it does not mean that the total number went up. Yes, correct. So basically, what's just to be plain here, what's the amount of specialties you have been selling to the customers in Q1 year on year? Was that basically a flat number? Or has there been declines or increases after the prebuying in December, if we have just looked at talking absolute numbers? Sorry, volume specialties in Europe? Yes. There was a decline in the first quarter. Okay. Okay. Got you. Okay. That's very helpful. And last one, FX effects. If you don't mind if you mind talking me through the FX effects you're expecting in 2016? Because last Page seven of the presentation, effects are expected to be slightly positive. Based on your assumption of 1.1 exchange rate of The U. S. Dollar to the euro, much would that change if we would assume a more, let's say, from today's point of view, a more negative environment like €1.15 per dollar? Okay. We started giving you these numbers on our Capital Markets Day, and I'm happy to update you here for the changes quarter by quarter, but not dramatically because we have our instruments in place. And if we would see 110, that would have a positive effect against 2015 of roughly 20,000,000. Right. And 01/2015 would mean there's only very small positive number. You. In single digits. Yes, very clear. Thank you very much. Welcome. The next question comes from the line of Markus Mayer from Baader Bank. Please go ahead. Yes, good morning. Only two questions remaining. One on the Salt business for chemical applications. Here, the demand seemed to be quite good in Q1. Is this sustainable in the development? Or is it just kind of a shift effect? And then secondly, do you also see that credit risks at Latin American farmers have an impact on your business here as well? And are there also kind of a risk mapping you're doing there for your customers? That's also my question. So Markus, it's Toftin here on the chemical salt question. I mean we have said that and you know that in all of the segments, despite we are now showing four subsegments or even five subsegments instead of what we saw, we still have a bunch of different applications we are serving. And we have seen a good development, as we said, in the Chemicals business in the first quarter in the fall. And there is if we do not see a significant change in GDP growth, be it in The U. S. Or be it in Europe, there should be no significant change to expect in that area. And then the last question on credit risk, it's Jafet Naudi speaking. We have a general policy to ensure all our receivables, and this is also the case of all states to Latin America, and especially in the Polish business, we have more or less more than 95% of our sales are injured against any creditors. Okay, perfect. Thanks. Thank you. We have no further questions coming through. So I will hand back to Doctor. Lohr for the conclusion of the call. Please go ahead. Yes. Thank you. Thank you for joining us today and for your interesting questions. Obviously, we are in a transition here in many respects, but I hope you could realize again that we are well positioned and financially equipped to handle this. And we are looking forward to talk to you soon, maybe to one of one or the other of you even following our AGM tomorrow. Thank you, and goodbye. Thank you. That will conclude today's conference. Thank you for your participation, and have a pleasant day.