Good day, and welcome to the K+S full year 2025 earnings call. My name is Barbara, and I'll be your Evercall webinar host. I would now like to hand over to Julia from K+S for some technical notes. Julia, you may now begin.
Ladies and gentlemen, also from my side, welcome to our call. We hope you had a chance to review our posted slides as well as our full year documents available on our website. After the opening remarks by Christian we will jump directly into the Q&A session. Some technical notes. Please refer to our disclaimer on page two of the presentation. A note on data privacy. Please be aware that the team session will be recorded, webcasted, and available as an audio replay on our homepage afterwards. People who ask a question in the team session should be clear that by switching on their camera and microphone, they agree to the recording and replay of video and audio sequences. Now I'd like to hand over to Christian H. Meyer, our CEO, for the opening remarks.
Thank you, Julia, and welcome from my side as well. Starting with the quarter. Q4 EBITDA was 17% above the prior year quarter. Therefore, we reached the upper half of our full year guidance range. Firstly, this was due to better prices in both customer segments. Secondly, EBITDA was affected by a higher drawdown in inventories than last year. This resulted in a negative EBITDA effect, which was overcompensated by a positive FX effect due to our hedging. Full year free cash flow reached EUR 29 million. Full year CapEx, EUR 546 million. In accordance with our dividend policy, we pay out 43% of our free cash flow and therefore propose a dividend of EUR 0.07 per share to the AGM. In the Q4 impairment test, we saw a value recovery over EUR 484 million.
Just to remind you, as long as we remain below the book value there will be fluctuations with even minor changes in the parameters due to the long term of the valuation models. Regarding our full year guidance, we expect global potash demand to rise again this year, following full capacity utilization in 2025. Potash prices are tangibly higher year-on-year, which will benefit Q1. Further developments will depend on the course of the spring season, when demand from many regions must be met simultaneously. Demand for non-de-icing products in the Industry+ customer segment is also likely to develop positively overall in the current year. Here we continue to expect moderate price increases for our salt products. You have all witnessed the exceptional and prolonged winter weather we experienced in January and February throughout Germany and large parts of Europe.
This has resulted in a significant upturn in our de-icing salt business. Therefore, we expect significantly stronger sales volumes than in 2025, assuming average winter weather in Q4 2026. We expect EBITDA to range between EUR 600 million and EUR 700 million. This translates to a midpoint above the 2025 level due to higher potash prices in Q1 and the strong de-icing salt business. Free cash flow should at least break even again despite elevated CapEx. For the upper end of the range, we would need an agricultural volume of 7.6 million tons, excluding trade goods, and a moderate price increase for MOP in Brazil during the spring season. This has to spill over into other regions and product groups and hold up during the second half of 2026.
The lower end would work with a volume of 7.4 million tons and prices at the level of the end of 2025. Just to give you some thoughts on the first quarter, which should see a better EBITDA than in 2025. We anticipate positive effects from our strong start in the de-icing salt business and higher potash prices. However, negative effects arise from the fact that Q1 is the last quarter with an effect in the year-on-year comparison due to the collective bargaining agreement, as well as from the significant inventory buildup that benefited Q1 last year. In closing, I would like to briefly outline the outlook for the future beyond 2026. We will position K+S as efficiently as possible in terms of resource allocation, structures and processes to make the company even more robust also regarding costs.
We also want to direct attention to our second pillar, the salt business. In addition to the potash business, the European salt market has undergone structural changes due to the permanent loss of Ukrainian capacity. Therefore, I would like to clearly state that salt belongs to our core business. We are focusing on operational improvements as well as further developing our product portfolio and market position. Now I'm looking forward to answer your questions together with my colleagues, Jens and Julia, and I now hand over to the operator to start the Q&A session.
Thank you very much, Christian. A few technical notes from our side. Can you ensure that if you want to ask a question, you press the Raise Hand icon located on your Teams app just at the top of your app. Once you select to ask a question, can you ensure that you cite both your name as well as your research house. Another request, K+S would like to answer your question one by one. If you have multiple questions, please ask one question at a time, and K+S will answer it first, and after that, you have the opportunity to ask further questions. This brings us to our first question. It comes from Christian. Christian, your line is open. Can you ensure that your device is unmuted, and you may proceed with your question. Make sure that you announce your research house. Your line is open, Christian. You may proceed.
Yes, good afternoon. Christian, Jens, Christian and Julia and team. Just two questions. I'll ask the first one and then wait, as asked for. Looking at weather data, we had actually. Can you hear me?
Can you put the camera, Christian?
I can't put the camera on for some reason.
Oh, you can.
No, I cannot.
You can try.
You have to live with my voice, unfortunately.
You can try, Christian. I believe that your camera has been activated.
All right. Now you can see me in all my beauty. Yeah. Thank you.
Here is my question. Yes, first question. I believe looking at current weather data, we had a relatively early start to the, let's say, at least, growing season in the-- in Europe, in the Northern Hemisphere. What are your sales people telling you about current demand, how that is happening? Can you maybe make some comments about, in that context, farmer profitability? Farmers are squeezed. I know that farmers are complaining all the time, but they are complaining. How is potash demand panning out at this point in time? Thanks.
Yeah. The potash demand, there we see a good demand. As our competitors announced that they are fully sold out for the first quarter. Okay, it's already at the end. That's also the situation for us and also for the first weeks in the second quarter that we also have a good demand and that we see more or less globally. The affordability of the farmers, that depends on the different regions. In general, we can say that the farmers are still earning money with some ups and downs. If you, for example, see the current palm oil prices, price levels, that's a good and healthy level. As you know, that's a potash eater crop, there we see also strong demand.
Okay, perfect. Now, my second question, I believe, at the end of the Q3 earnings call, you mentioned a planned big maintenance for Bethune for 2026. How is that coming along, and can you tell us about timing there?
That's in the summertime. That's every three years. There are three months maintenance, but we are on a good way to keep the production stable or to increase it a little bit compared to last year.
Okay, great. Thanks very much.
Thanks, Christian.
Thank you, Christian, for your question. Our next question comes from Ben. Ben, your microphone is open. You may proceed. Can you announce your research house?
Great. Thank you. Ben Isaacson, and my research house is Scotiabank.
Yeah.
Good to talk to you all. I just have maybe a high-level question on just everything that's going on in the Middle East.
Yeah.
You know, we, when we look at Q4, when we look at fall, we started to see a little bit of resistance to potash demand in some markets, whether it was in North America, a little bit in Europe. Now we look at nitrogen that's kind of not doubled in price, but moving meaningfully higher and presumably other input costs for the farmer, such as diesel and whatnot, will also move higher.
Do you not see a scenario where we could actually have a potash demand destruction in the back half of the year. I noticed in your guidance, your guidance said that you've included or your assumptions take into consideration what's going on in the Middle East. Maybe you can start by talking about that and, you know, what the guidance have been or how are you thinking about those paths for future demand?
Yep. Maybe make a real general picture with regards to the situation in the Middle East. There are different stories that you can hear in the markets based on the fact that the fertilizer prices increase that the energy costs increase. Normally, they say that you have a spillover effect also to the crop prices. The crop prices increase, and then it's affordable for the farmers and makes sense to apply fertilizers. The others say if the prices are too high then the farmers won't buy any fertilizers. There you have no clear picture.
At the end, I expect that we are still 8 billion people on the Earth, there will be a demand for food and that they will apply potash maybe with some volatility. From our perspective, we don't think that this will have a real big impact on the volumes. We see a good, strong demand in Brazil. We see a good demand also in Asia and in Europe and the U.S., we expect a normal level. With regard to the situation in the Near East, from our position, it's important to know that we have a real low exposure in this market, so that wouldn't be a problem to shift or relocate the volumes to other markets.
Also for the logistics, we from our perspective, as we have sites on two continents, we won't have big impacts. Maybe some increases for the oil price for the logistics for the ships that directly go into the real prices with the formula, but this is an impact for all competitors. That's not a disadvantage, not an advantage for us. And from the region, that's correct. If you have a look to the Strait of Hormuz, 45% of the sulfur has to go through the strait, and it's blocked currently. Also a huge volume of up to 30% of nitrogen is coming from this region. That there are different stories in the market, what effect that finally will have.
But, uh-
Sure. Yeah. Can I just one follow-up, and then I'll pass it on. This may be difficult to answer, but, you know, on a regional basis.
Yeah.
Can you talk about which farmers or growers are in best shape and which ones are most at risk of seeing pushback, not necessarily to potash from K+S, but maybe just in general?
Yeah. If you go through the different regions, as I just mentioned, U.S. and Europe, we expect a normal basis. But if you have a look to Asia, especially with the palm oils and so on, yeah, the farmers have a good situation. U.S. farmers are not in a great shape with the sanctions, but I think they will apply potash, especially based on the high harvest of last year. In Brazil, we see a growing acres of the farmers and also a good demand. We think that's in line with their profitability. In Brazil, I would say it's okay, and, but especially Asia has a positive outlook.
Perfect. That's very helpful. Thank you very much.
Thanks.
Thank you, Ben, for your question. Our next question comes from Angelina. Angelina, your line is open. Can we ensure that your devices are muted, and please announce your name.
Hello. I hope you can see and hear me okay. It is Angelina Glazova from JPMorgan. I have one question, but it consists of two parts, so I will split it in two. I wanted to ask about your SOP business in Europe. What is the environment in general right now in terms of demand? I think in the context of the Middle East situation, there is an understanding that quite a lot of sulfur comes from the Middle East and from the affected regions, so there is possibly an upside risk to sulfur prices. In this context, I was wondering if you think there is room to increase SOP prices in Europe if that happens, just depending on the demand levels, because those prices have been at quite high levels already.
Yeah.
It's not quite clear whether there is room to further increase them.
Yeah. At the current, as you mentioned, it's very important that around 40%-45% of the global sulfur is coming from the Near East needs to go through the Strait of Hormuz. They are blocked currently, but you... At present, you don't see much increases for sulfur prices. It from our perspective is if we stabilize the premium that we have had in the past on a pretty good level, and then we... It depends finally how long it takes. What's the difference between us and our competitors, the SOP producers, the Mannheim producers have the challenges to get sulfur physically and the risk of where the prices will go.
On the other hand, the higher energy costs will affect their production costs too. That's our advantage from our side as we have the sulfur already included in the rock salt, so we don't have higher cost for sulfur or the physical deliveries. With our gas consumption, we already hedged 70% of our year gas that we need for Germany.
Thank you very much. That is clear. The second part is a very quick follow-up. Could you please remind us of the exposure of the SOP business, maybe both in terms of volumes and also to the extent possible in terms of earnings sensitivity to price increases?
Yes. It is 700,000-900,000 tons. That is the number that we are having, and I mean, therefore, the earnings sensitivity is quite clear, yeah, with that number because price increases directly go through here. With that 700,000-900,000 you know that we can always decide intentionally which way we choose. Yeah. If we decide for the so-called SOP Max, that just means that we have a lower volume in total, but we would only decide for that if it makes most sense with regards to EBITDA and margin expansion.
In addition, it's also important to know that the sulfur component is also included in our Korn-Kali and in our kieserite but on a lower level, the main effect will come from the SOP.
Understood. Thank you very much.
Thanks.
Thank you, Angelina, for your question. Our next question comes from Michael. Michael, your line is open. You may proceed with your question. Michael, please ensure that your device is unmuted, and also ensure that you quote your house research.
Yeah, happy to do so. Hope you can hear me well. Michael Schaefer here from ODDO BHF. Thanks for letting me in here. I want to come back to your outlook statement on the AG volume. You are, I think, projecting an increase compared to last year's level, excluding also the trading 7.5, is the lower end, which is even higher than what you reported last year. I do wonder where this is coming from, given where you are also with the maintenance, the major maintenance shutdown in Canada. Can you give us a bit of an indication as to what extent netback optimization plays a major role in your planning, i.e. more of the specialties, maybe than on the potash, on potassium chloride, which we have seen in 2025. Thanks.
Michael, if you compare our outlook that we had given for 2025, you would have seen EUR 7.5-EUR 7.7. EUR 7.4-EUR 7.6 is still not kind of back at that part. That is why the increase production-wise is totally possible, with the 100,000 tons coming from Bethune. Now it's just a question of the product mix. We did not reach that EUR 7.5-EUR 7.7 because we decided for SOP max. Now it's the final outcome between EUR 7.4 and EUR 7.6 will totally depend on SOP min or SOP max, not the increase in Bethune. That will come with 100,000.
Mm-hmm. Okay, cool. Understood. Second question is coming back to what you flagged before, i.e., the overlooked salt business which you have. So let's divide the question into two. Maybe give us a bit of an understanding. You talked about price increases and obviously strong volume evolution in de-icing. Can you give us a bit of an indication what kind of earnings contribution we should expect from those, let's say, non-de-icing and de-icing type of businesses underlying? Because obviously, you are not reporting that anymore, unfortunately. Just giving us a bit of a color here to on the sensitivities looking into 2026. Thanks.
Yeah, we are very happy with our salt business. As you know that we are not reporting the figures of the earnings. But you see it finally from the revenues, the increases and the cost levels are pretty close to same. Some smaller increases, then you can see that our earnings or netbacks are higher. We have real low capital because the mines are pretty old. The book values are written down, so you don't even have no high impacts from depreciation, neither from CapEx volumes. We don't need higher CapEx volumes in this area. That's a low capital intensity.
The volumes coming from de-icing, these are not the highest prices or highest netbacks. If you have high de-icing volumes, then the average price will go down. That's a normal effect. In total, the absolute earnings will increase, especially if we are able to sell about 500,000 tons more compared to last year with the de-icing business. That has not the effect like a pharma salt.
Okay. Understood. Thanks.
Michael.
Thank you very much, Michael, for your question. Our next question comes from Joel. Joel, your line is open. You may proceed with your question.
Hi, Joel.
Once again, your research.
Joel Jackson, BMO. First of all, thanks for doing a North American friendly call time. More of that. Thank you very much.
Just for you, Joel.
More of that. Ben across the road appreciates that. I was interested in your FX assumptions, where you're assuming a 1.2 exchange rate for the year Euro USD, but we're at 1.15. It makes a big difference on earnings. Can you explain that assumption?
Yeah, sure. We can. Our assumption is 1.20 for the year, and obviously we are hedged on a free cash flow level, but just only to some extent on an EBITDA level. Five cents lower exchange rate would yeah end up in EUR 20 million higher EBITDA. That's the sensitivity.
Sorry. I may have missed how much you are hedged this year and at what rate? I may have missed what you're saying, sorry.
Yeah. We have 70% on a cash flow level, on the revenues.
On the FX. On the FX.
On the FX, yeah. On the EBITDA level, it's around about 50%. The hedging rate is 1.14 for the worst case, and the best case is 1.09.
You're also 70% hedged for gas. The numbers got to 70%.
Yeah.
Okay. Just making sure. Okay.
Yeah, yeah.
Okay, second question I have for you is, l ike obviously sulfur is really extended here and might get more extended, and we all know why. It was extended before, for March. Are there ways you can capture more? 'Cause you've got a free feedstock of sulfur that doesn't come from the Middle East. I mean, are there creative ways, unique ways you can maximize the value of sulfur you have? Or should we expect the SOP premium over MOP to rise substantially? Are you seeing that from customers? You mentioned Korn-Kali as well. Should we expect that premium to rise going forward?
With the sulfur, that's depending on the situation, finally, if it finally will spill over to the prices. We have limited access to the sulfur because that's all included in the rock salt and there we are only able to, as we just explained, switch between 700,000-900,000 tons with the SOP. As I just mentioned, based on the current situation, we expect that the premium will be at least stable for the year. If there will be some higher impacts that at the end our competitors won't have access to the sulfur, then it could increase. That's also depending on the seasonality when you need the SOP and if in this situation then the sulfur financially is not accessible.
Finally, are you worried about European potash demand? It kind of dovetails a bit of what Ben was asking earlier.
No.
Well, as gas prices rebound, I know the season's been late for fertilizer in Europe, like should we be worried about it?
No. From Europe, that we expect a normal demand.
Thank you.
Yeah, thanks to you. Thanks for joining.
Thank you, John. Thank you for your question. We're gonna move to our next question. It comes from John. John, your line is open. Can you ensure that your device is unmuted and provide your research house?
Hi, everyone. Yeah, it's John Campbell with Bank of America. Thanks for taking my questions. I've got two please, if I can. Could you maybe elaborate on perhaps your potash sales mix by individual region, say in 2025, so presumably Brazil, China, Europe. Maybe if you could lay out those percentages, that would be helpful. Also if you could maybe give any guidance kind of where you expect volumes to be settling in terms of the different regions in 2026 as well.
Pretty close. Half of our volumes we are able to sell within Europe. Europe-based, that's also very important for us. There we are independent from the U.S. dollar FX rate. We have around 1 million tons to Brazil and a little bit lower to Asia. These are the main areas.
Very good. Any steer on 2026? Would you expect a stable share?
Yeah. There we expect yeah, it could be stable. There we have some volumes to China, but it and to Brazil. There we permanently optimize our regional mix to optimize the netbacks. There we are able to shift, for example, to Brazil or to Asia, or maybe to keep some more volumes in Europe, depending on the price levels. That also depends finally on the logistics situation and the logistic cost, because there we have the big advantage compared to our competitors, that we have lower logistic costs compared to the others with our routes.
Okay. Very clear. Thank you. Second question. Do you have any kind of sense or reading on the levels of inventory in some of the major markets? I think in 2025, you know, Chinese inventories were a big topic. Presumably there's a lot of other bigger topics going on at the moment, but do you have any kind of updates in China and Brazil and India?
Yeah. Starting with India, the inventories are pretty low currently. Everybody is waiting for that India signs the contract with others. We are not at the table for the negotiations. With China, they are catching up a little bit with their port stocks to their strategic volumes. What we still see is a good demand and keeping the price level at a pretty high level for the cross-border deliveries from Russia to China. That reflects finally that there will be also a good demand. Brazil is maybe a little bit lower, but coming back to a normal level. In total there we see a strong demand, especially in Brazil.
Okay. Very clear. Thank you.
Thank you very much, John, for your question. Our next question comes from Oliver. Oliver, your line is open. You may proceed with your question. Can you ensure that your device is unmuted, and please, cite your research house.
Yes. Thank you very much for taking my questions. Research house is Warburg Research. My name is Oliver Schwarz, and obviously, I'm taking the questions one by one. First of all, I'd like to challenge you on your guidance, the upper end. You stated that in that guidance is baked in slightly higher prices, both at the beginning of the year and also as a sustainable level of those higher prices towards the end of the year.
Yeah.
Given the situation in the Middle East, obviously, let's say shipping rates are bound to go up, bunker oil is getting more expensive, shipping room is getting more scarce, transport routes are likely to expand to avoid the bottleneck we currently have at the border of Iran. You, other than your competitors, normally don't communicate prices ex-factory, but including freight and insurance.
Hence, if the freight prices go up, obviously the prices go up as well because that's just a pass-through item for you guys. But on the other hand, the price for your product that you receive for the product isn't increasing despite the pricing, the overall price increase. What would you say we will need on top of the current price, as that you see, for example, in Brazil with the around 90, as a sustainable level for, let's say, the average of the current year to basically reflect the likely higher transport costs?
Finally, or maybe important is that the higher logistical costs, the freight costs based on the mentioned checks from your side, that also our competitors are affected by. That could increase the prices and maybe furthermore. What's very important, what we expect for the current year for the upper end, a moderately higher price compared to the February level. At spring season that we see moderately higher prices, and that will be reflected or spill over to other regions and other products. This moderately higher prices will also last for the second half of the year. That's very important. We are able to reach the upper end and with the higher freight costs, I expect that that should be finally reflected because our competitors will be affected too. That will be compensated higher costs and maybe other price fluctuations.
In the outlook, we have basically based the outlook on the fact that we have normal shipping rates, then the prices need to go up moderately, yeah. If you have not normal shipping rates for the upper end, they would probably need to go up a few euros more. It's not much, yeah, for the full year and for the AFT to be able to get that.
Excellent. Second question is, in regards to your competitors from Israel.
Yeah.
Obviously the route to Europe for them is getting more attractive than the route towards the south. Hence, are we likely to see more competition in the European market from those suppliers?
Yeah, you're talking about ICL and the Arab Potash Company from Jordan.
Mm-hmm.
Israel can use the ports in Haifa, but also go through the Gulf of Aqaba and Suez Canal.
Mm-hmm.
At the end, the ships avoid to go to the east along Yemen also before the Iranian situation.
Mm-hmm.
I think that wouldn't change the situation. That's a competition like before.
Okay. Thank you very much. Last question is on the, let's say, the impairment in summer and the reversal now in Q4. Obviously, that has very much to do with August prices, that or perhaps the prices you take into account for potash on the longer term basis. Just to get, let's say, a feeling for the sensitivity of your model that you use to calculate the value of your assets, can you just give us a feeling what you changed in your internal calculations to come up with, let's say, this chunk we saw now in Q4 that's basically written back? I mean, we are talking about substantial numbers here. What did basically trigger that reversal?
We have different factors, and we name them all in our annual report, so they see it. This time, we had a change in the WACC, so it decreased from 8.7 to 8.2. This has an effect of roughly EUR 500 million. That was the write back we saw in the second half or in the fourth quarter.
Thank you very much.
No changes with regard to the potash assumptions. They stayed the same, no changes there.
Okay. Understood. Thank you very much.
Thanks to you.
Thank you, Oliver. A gentle reminder to all, now we have the opportunity to ask additional questions. If you would like to ask any questions, feel free to press the hand raise icon located on your Teams app. We'll wait here shortly and pause here shortly to allow any other questions to generate. Christian, it appears as though we have no further questions at this point, so I'll hand over the call back to you for any final remarks.
Yeah. Thanks to all of you for your questions, and I wish you a really great springtime and a good Easter, and see you soon.
Bye.
Bye-bye.
Bye.
Thank you, Christian. As a reminder, this call was recorded and a recording will be made available shortly after today to this conference. Thank you all for your participation, and have a great day.