K+S Aktiengesellschaft (SDF) Earnings Call Transcript & Summary

Ladies and gentlemen, I would like to welcome you to our analyst conference, and we appreciate your great interest and the opportunity to meet a few of you here in Frankfurt and the rest virtually. Before I come to our very favorable business development, allow me to start with the following. After the Supervisory Board and Mr. Boeckers had agreed to terminate his contract at the end of February, Dr. Christian Meyer was appointed as the company's new CFO. He will join us in spring 2023. I know Dr. Meyer very well as an auditor at Deloitte, also for K+S. He is a proven financial expert with many years of experience, and I look forward to working with him. For the time being, I will also assume the role as CFO. I would like to thank Thorsten Boeckers for the good cooperation over the past years. And now let's look into the business development during 2021 on Slide #2. In one sentence, it was a very successful year for K+S. We successfully completed important measures during this period. With the sale of the operating unit Americas, we have significantly reduced our debt as planned. The associated restructuring of our organization makes us leaner, more efficient and unburdens our cost base. Shortly before the end of 2021, we also successfully completed the merger of our waste management activities in the new joint venture, REKS. This was also a key element of the strategic realignment of K+S. Last but not least, the proceedings with the FREP and BaFin were concluded. The final findings did not trigger any value adjustments in our financial statements. Now, let's turn to Slide 3. In terms of operations, we once again achieved an excellent production performance at all our sites. We succeeded in meeting higher demand for our customers and increasing sales volumes. We also continued to master the challenge of the ongoing COVID-19 pandemic by taking measures at our sites. Please turn to Slide 4 for a closer look at the very positive agriculture market development. Our own performance benefited from this over the course of the year. High demand accompanied by fully utilized supply resulted in a significant increase in potash prices. In Brazil, prices have even tripled. Due to weather conditions, our de-icing salt business also developed very positively in both the first and the fourth quarter. And now, let's take a closer look at Slide #5. We translated our strong operating performance and favorable market conditions in higher earnings and cash flows. In the course of 2021, we raised our outlook 3x and generated significantly higher EBITDA of around EUR 970 million for the full year 2021 compared with around EUR 270 million in 2020. This included the one-off gain of around EUR 220 million from the REKS transaction. Our share price development from around EUR 8 at the beginning of the year to more than EUR 20 is just another proof that confidence in our company is returning. Looking at Q4 2021 on Slide 6. We achieved the strongest quarter in our history with an EBITDA of EUR 611 million. The biggest contributor was the higher potash price. About EUR 220 million were coming from the REKS transaction. Combined with strict cost discipline, we were able to more than compensate higher prices for freight, energy and raw materials. Adjusted free cash flow could be increased to EUR 245 million after minus EUR 100 million in Q4 2020. Slide 7 shows that we achieved a major act of liberation in reducing the company's debt. With the sale of our North and South American salt business completed in April 2021, we have massively reduced our net financial liabilities. The rating agency Standard & Poor's has already responded to this with the first improvement in our rating to B+ with a stable outlook, and now we are aiming for an investment-grade rating. Please turn to Slide 8. Our new corporate strategy sets the guiding principles for the successful development of K+S. We are focusing on the core business with potash and magnesium products and, are working intensively on further optimizing our existing business. The goals of our new corporate strategy are clearly defined. From 2023 onwards, the K+S Group in total, as well as each of our plants, should generate a positive free cash flow even in the event of temporary low potash prices. Over a 5-year circle -- cycle, we aim to earn our cost of capital and target an EBITDA margin of more than 20%. With Slide #9, I want to highlight that we are first of all focusing on optimizing our existing business in implementing our new strategy. The teams at our sites are already working very hard on many initiatives and projects. In Bethune, we want to increase production capacity to up to 4 million tonnes in the long term. At the same time, as at our commodity site in Zielitz, we are planning to implement specific measures to continuously improve our costs. At our specialty plants in Werra and Neuhof, the focus is on further optimizing the product portfolio. And Slide #10 shows that we are also making further improvements in the areas of sales and marketing as well as in the supply chain. Projects have been launched here that will soon make a positive contribution to our operating earnings. Ladies and gentlemen, please turn to Slide 11. Our focus on the environment, nature and climate protection remains unchanged. Every business decision we make must be in line with our climate strategy and sustainability goals. Between 1990 and 2020, we already reduced our CO2 emissions by 80%. Looking ahead, we have set ourselves the goal of reducing CO2 emissions by another 10% by 2030. We can achieve this with our own efforts. It is also technically feasible to become completely climate neutral by 2050 or even a bit earlier. This, however, requires the right framework conditions. Energy must be affordable and available where needed. We accomplished another major step towards improving water protection at the end of 2021. The injection of production water was finally terminated. Looking ahead, we assume that the permit for the underground storage of these waters will be issued during the year. At the same time, we are well prepared for compliance with the lower target values set by the authorities for discharges into the Werra river by the end of 2027. In the disposal of solid residues, we will have completed the ongoing tailings pile expansions at several sites by early 2023. Further major capital expenditures and required permits will then not be needed before the end of the decade. Moreover, the project to cover the large tailings piles at the Werra and in Neuhof have recently started. Ladies and gentlemen, this brings us to the outlook on Slide 13. At this point, that's very important to me. I say clearly that it is unbelievable for me to witness another war in Europe. I'm hoping for a quick end and maybe even over the next couple of days. The situation is confusing and dynamic. Our revenues in the affected regions are very low, and we do not have any assets there. Of course, we are observing further developments closely, especially regarding energy supply and sanctions. And now, please turn to Slide 14. Overall, the general conditions on the agriculture markets remain positive. It is true that the prices of input materials, including fertilizers, have risen for farmers. Prices for their agriculture products, however, have also significantly improved or remained at a high level. Additionally, global inventories for key agriculture products are at historically low levels. As a result, the yield prospects in agriculture continue to be attractive. They provide an incentive to increase yield per hectare with balanced fertilization. Against this background, we expect overall demand for potash to be very strong. The recent conclusion of potash supply contracts in China and India at significantly higher prices is evidence of the attractive market environment. An increase in global potash supply is hardly possible because of the limited global capacities. Ladies and gentlemen, please turn to Slide 15. We expect EBITDA to range between EUR 1.6 billion and EUR 1.9 billion. This would more than double our operating earnings compared with the previous year and even more. It would be the best result in our company's history. Even in view of the war in Ukraine and the associated dynamics in sales prices as well as energy risks, K+S is sticking to this forecast. Therefore, we also expect our adjusted free cash flow to increase significantly between EUR 600 million and EUR 800 million based on a CapEx figure of EUR 400 million. The range of the forecast results, in particular, from different scenarios for selling prices, costs, logistic availability and weather conditions over the course of the second half of the year. In view of this positive development, there is a question of how we will use the expected additional liquidity. We would like to answer this on Slide 16. The key measures we are looking at are: the repayment of our bond due in June; the purchase of further CO2 certificates for the years 2026 to 2030; the accelerated increase in production capacity at our Bethune plant in Canada; the further reduction in factoring; payments of dividends; and finally, further CapEx for optimizing our existing business. These measures have not yet been included in the free cash flow forecast. And please turn to Slide 17. It goes without saying that our shareholders should also benefit from the positive business development in 2021. The Board of Executive Directors and the Supervisory Board, therefore, intend to propose a dividend of EUR 0.20 per share at the AGM on May 12. In accordance with our new dividend policy, the amount will be made up by a basic dividend of EUR 0.15 and a premium of EUR 0.05. The total dividend payout would, therefore, amount to around EUR 38 million. Ladies and gentlemen, an exciting and at the same time good year 2021 lies behind us. We have made the company more efficient and profitable. Furthermore, we have strategically realigned K+S. The business prospects are all positive. Thank you for your attention, and we are looking forward to your questions. And now, I hand over to Julia for some technical details. Julia, please.

[Operator Instructions] Please note that the Teams session will be recorded, webcasted and be available as replay on our homepage afterwards. People asking a question from the room or in the Teams session have to be aware that by turning on their camera and microphone, they give consent to saving and replaying video and audio sequences.

[Operator Instructions] This brings us to our first question. Christian?

Thank you very much, Christian Faitz, Kepler Cheuvreux. Two questions for me, one by one, all circling around Bethune. First of all, can you remind us on the volumes which are now being shipped into the U.S., which have been shipped in 2021? And what your plan is pertaining to the gearing that up into 2022?

Thank you, Mr. Faitz. Yes, the U.S. is becoming a more and more important market for us, especially from Bethune or only from Bethune. And, by the way, I think it was never clearer than today that it was a strategic perfect move to build Bethune. We are so happy now to be in North America with at least one mine and the big mine, which will be growing over the years. And we have achieved 250,000 tonne sale in 2021 in the U.S., and we should be able to do 500,000, double the amount in the next 3 years. That's our target.

Okay. Excellent. And then second, on the Bethune accelerated ramp you mentioned as part of making your funds work. What's the time frame for gearing up the production from the currently around about EUR 2 million towards that EUR 4 million? Is that significantly accelerated now? Because I have in mind you were looking at around about 100,000 tonnes to 200,000 tonnes per year.

Yes. The first number was the correct number. So our initial plan was to ramp up Bethune step by step. We are talking about increasing the secondary mining and then, from time to time, we have to enlarge our logistics. That takes time. And at the same time, we want to not -- we want to do it in a way that the CapEx is optimized. So 100,000 tonnes was the plan. This year, we expect 2.1 million tonnes. But as our balance sheet has improved dramatically, the best investment is in speeding up doing this. But the opportunities are limited, so we might invest a little bit more and we might do a little bit more than 100,000 tonnes. But 200,000 tonnes a year is already very optimistic.

Thomas Swoboda, Societe Generale. Two questions for me as well. Firstly, could you comment on your energy hedging? So how much have you hedged? And I would be especially interested, what risk is there? Can this hedging be knocked out, or is it very safe? That's the first question.

Okay. Thank you, Mr. Swoboda. Yes, I think we have a long history in hedging risks. And Mr. Bettenhausen is present here, so I'm happy that he's always doing this and looking very far in the future. So we have hedged not only CO2 and other things and currencies, but also energy. And we are -- we have 92% for 2022 already, so 8% missing, so that is a quite low number. And even for '23 and '24, we have 72% already. So -- and these hedges are safe as long as gas is flowing. If gas would be stopped, gas shipments would be stopped entirely, that, of course, would be a force majeure event. That is not a scenario we are expecting, but what would happen if this would be expected -- would be as a scenario? I think we and every industry company -- industrial company and the German government has already worked on that. We should be safe until October. And with many measures taken, there would be -- depends, of course, on how heavy the winter would be. There is a potential risk of shutdowns of several weeks over the month of November and December. But that is the worst, worst case, and I'm not expecting this. And if I might, a long answer, but I think things are of general interest when we are talking about in -- the pipeline. North Stream 1, sorry, it could be shut down. That's only 1/4 of what is coming from Russia. So there are 3 different pipelines, and they do not have even discussed to do anything with the other 2. So if that would be stopped, that would not be of major -- would not be a major risk to us. Sorry for that long answer, but...

No problem at all. This is of genuine interest. My second question is on salt. I saw a headline from your press conference this morning, you were asking about whether your Industry+ unit is on sale. I mean it looks like you will be having plenty of cash at hand if everything goes as planned. So is how serious should we be thinking about K+S being a pure potash player without salt?

Yes. Yes, I'm surprised about this headline because I did not say anything else than what I said in November when we disclosed on the Capital Markets Day our new strategy. We said that salt is no longer core to us, which is normal after we have sold our U.S. business. And the remainder is 20%, and the remainder is good for EUR 50 million, maybe EUR 60 million, maybe EUR 70 million EBITDA. So it's not even a risk mitigation for the customer segment potash any longer. And we also said we are not actively looking for a buyer, but we would listen and we would have to listen if somebody would knock on our door and ask for -- talking about a potential transaction.

So the first question from the Teams session comes from Andreas Heine from Stifel.

Can you see me now? Hopefully.

Well, we can hear you, at least.

At least. Sorry, my camera doesn't work. I have 2 questions, and as you ask me, I will ask you in a row. The first is on net financial debt. Obviously, with this year's earnings being very strong and next year probably not too bad, you basically have no debt anymore. Usually, one would say that is kind of over-finance. But with volatility in the potash business and your experience you had in service. So...

Our target is an investment-grade rating, and we should be there by the end of the year. Of course, it's not our decision, it's Standard & Poor's. But these numbers, they should act that way. And I also gave you an idea what we will -- with what we are going to do with cash, which exceeds the limits that we need to have for an investment-grade rating. So we have bonds to pay back. We are going to invest in this. In ramp-up in Bethune, that is core because it is the most efficient growth story for K+S amongst all. We have some other ideas to increase our profitability on other sites to optimize the existing business, especially at Werra. We are thinking about in the long run or mid-term to have the Werra site with less liquid and dry residues and less CO2 emission. That would be a huge step and that requires some CapEx as well. And of course, we will have an eye on dividends. And maybe if this world -- if this war is at its end and we have an idea how the new world will look like, maybe there are even some opportunities for some M&A activities. So that is, in a way, our agenda for using free cash.

May I continue on the last point you had, the question about the M&A. What would that be? In the potash business, there are probably no assets around. Would that be building up a new leg or what is what you would think about in that case?

Yes. So following our current strategy, that would more or less be in some specialty segments. But as I said, I think we have to reevaluate opportunities and we are going to do that in a couple of weeks so that we might come up with completely different ideas. So times like this are very risky, but also deliver opportunities and you have to be quick and you have to have a good eye on things.

Then the second question is what we ran through with Ukraine and Russia with what -- quite a number of Western participants not being willing to buy in the future from Belarus and Russia might change then the business environment for K+S in the potash business by having 2 competitors in these regions. How do you think the trade flow will change is how people thinking these days, in buying or not buying from Belarus, Kali and Uralkali?

Yes. That's another tricky question. First of all, I would rather prefer have an end of this story and have competitors from Belarus and Russia being active in all markets as in the past than having this crazy war. But I'm not trying to shy away from your question. First of all, Belarus is already not able anymore to ship anything into the Western world. And since last week, the sixth -- MOP 60 is on the sanction list as well, so they are hit in Europe. They are not able to enter the market anyway because they cannot use their harbor, so -- and they have already declared force majeure. They obviously reduced production, that will be missing as capacity volume in the market. And Uralkali is not on the list, but the owner, as I learned this morning, the owner of Uralkali is on the sanction list. That will have an effect. We learned that some big shipping lines are not entering Russian markets anymore. So making a long story short, that will have a major impact on our markets. We should expect an undersupply in the short term. In the mid-term, it could be that the Eastern European companies are focusing more on Asia and the Western European and U.S. -- or North American suppliers are focusing on the rest of the world. But that is only guessing because, I said, the situation is so dynamic, but that is what I would expect from today's perspective.

May I add to this. Yara has said that they are -- that they have stopped getting any volume from Belarus this end of February. That is quite a high volume customer. Have you seen more volume from this one? And is what you see in this application season in Europe already affecting the regional split of your own deliveries in 2021?

Yes. I'm not expecting any shipments from Belarus to anybody, as I said earlier. Of course, we have to evaluate the situation and have to adjust our destinations as we have done last year already. And yes, I think I should leave it with this.

Thank you, Andreas. The next question is coming from Joel Jackson from BMO.

Can you see me? Hear me?

Yes, we can hear you. And we see you also.

Great. It's both, right. I have a few questions, of course, I'll ask them one by one. Burkhard, when you talk about gas being 92% hedged for '22 and 72% hedged for next year, can you give us a sense of what average gas price that is for this year or next year?

In the hedge?

In the hedge.

EUR 40, EUR 40. So we hedged a very -- the early parts were very cheap, then we had a more expensive part. But blended, it should be EUR 40.

For both years?

No, for 2022. It's cheaper for '23 because we have only 72%, and we did that earlier than the last tranche in 2022. So it's slightly below EUR 40 for '23. By the way, we have 72% for '24 as well. But if you take EUR 40 for all years, you are fine.

Okay. So what will be -- if you think of all the different buckets of costs, gas, currency, logistics, obviously, prices are insanely high right now, very strong. What is the cost drag per tonne on MOP and SOP and the other products in 2022?

The cost per tonne for energy?

The drag. No, no, that -- what is the negative impact on costs in 2022 from all the different buckets of costs, including energy?

Okay. Not per tonne, in total?

Well, per tonne. I think per tonne.

I take the total number because I have that by heart, then you have to do the math by yourself. So it's -- in total, it's roughly EUR 200 million, and it's -- the bigger part stems from energy, but another very huge part from freight as well EUR 200 million.

If we think about prolonged issues with Belorussian and Russian supply and maybe the market for granular being tighter, what is the current granular capacity for K+S in Germany and Bethune? And would you look at using some of your windfall free cash here to upgrade your granular capacity?

Yes. The capacity for granular is roughly 40% of our MLP volume, and we have only limited opportunities to increase that. But I'm not seeing the granular market more tight than the standard market. So I think I see the tightness of all products.

Well, what if we get into a world where China and India end up buying and some countries [ stay ahead of us ], buy more potash from Russia and Belarus because of politics? And do you see -- and we got a shift of trade and granular becomes a bigger part of the non-Belorussian, Russian sales. Do you see what I'm saying?

Okay, okay. But that is nothing we should see this year. If we talk about next year or maybe 2024, of course, there are opportunities to increase granulation capacity. Not -- we will all not be able to increase capacities in this time significantly, but we can adjust from standard to granular in 1 or 2 years.

But you're not looking at that yet?

We are looking at everything, but still the situation is too dynamic to take any decisions on that.

And then my last question following up on that is, and I forget the name, but I believe a number of years ago, I think you have some reserves in Germany that you could restart or -- and you haven't mentioned that for years for obvious reasons because deposit trend wasn't strong enough to do that and you were focused on Bethune and other things. But what -- how long would you have to see prolonged Russian, Belorussian issues before K+S might look at going back and bringing back some other capacity in Germany?

You're talking about Siegfried-Giesen. sorry for the difficult German name. And we have also some opportunities in our existing mines, but we are talking about projects of at least 5, maybe 10 years, so that would not help in the current situation.

Okay. 5, 10 years, not 2 years. Okay.

The next question comes from Michael Schaefer from ODDO.

The first one is on your outlook statement, Mr. Lohr. I recall a couple of weeks ago, obviously, when your first time presented the outlook, you stated that probably that there are some -- obviously, some easing on the pricing side assumed for the second half to make basically the average or even the low end there of the outlook that you presented. With all what we are just discussing or what we've heard about the past couple of days, so the question is, you today confirmed the outlook range. So what's needed from your perspective, and looking into today's situation, to make it to the upper end essentially? This would be the first question.

Yes, you're right. That was our expectation because we were already on a high level, pricing level without the current situation and we thought, for planning purposes, being more cautious in saying that in the second half, the prices would rather decrease than staying on that level. That is not our reading any longer. But at the same time, the cost risks are increasing so that we believe it's still what we should see. From today's perspective, and I said it's very dynamic, we should -- we will see -- still see the EBITDA being in this range, especially because in the second half, we've no real visibility on what the impact on availability and on cost development will be. So it will level out, the fact that we are not expecting the prices to decrease. On the other hand, that is a good opportunity for a good 2023 as well and on the other hand, taking into account inflation risk and availability risks.

A quick follow-up on the new visibility topic. So can you just shed some more light on your order book basically in the first half?

Yes. As you know that order book is not a big issue for us as we are talking about spot pricing in most regions of the world. And we have not really negotiated with China and India with -- on the new contract, but we are more or less booked until April, partially May already. That said, it's becoming less important because with this situation, everybody will settle the whole production, which is available this year, for sure.

Okay. Cool. And the second question goes to your use of cash or the freedom you've gained here. I would like to come back on the Bethune acceleration and then also you mentioned on the slide that you may further moderate the factoring which you are using. So taking both together, so what's the kind of additional, let's say, capital allocation we should think about the 2 topics here?

The easier part is the factoring. At the end of the year, we had still a volume of EUR 120 million. If we draw that back, it's EUR 100 million impact on the free cash flow. And yes, Bethune will be maybe EUR 50 million this year, could be more in the coming years. But with the effect that we quicker ramp up Bethune and you know that we do not only have the utilization advantage, we're also talking about a very efficient expansion because the secondary mining is a very cheap primary cost production. And that is, again, under all options that we have to use cash, this is the most efficient one.

And this would be then on top of the EUR 100 million I have in my head for Bethune annually.

Exactly.

Okay.

The next question comes from Alexander Jones from Bank of America.

Two, if I may. I'll start with the first one. Just circling back to your comments on use of cash and M&A, is there a reason that the specialty fertilizer space looks less attractive to you now? Or is that just a comment on how much uncertainty there is in the world and you're not sure? And are you able to give any hints about which areas might look more attractive at sort of the current situation holds to your comments on other opportunities being available?

It is still a focus area for us, but we are not seeing that we are going to invest this year, maybe not even next year. You have to look for opportunities. And as I said earlier, we have to make up our minds how the potash world is looking like in a couple of months from now. And there might be other interesting opportunities than doing bigger investments into specialties for the time being.

Understood. And then just to follow up on the market outlook. I guess the price is telling us that we need some level of demand disruption. Could you give us any color on what level or how much, if any, demand disruption you're seeing across the markets that you're selling into at current price levels?

Yes. That's not the same in all areas. We are expecting a decrease in demand in Europe, but that is less due to higher potash prices. It's more a question of availability of nitrogen. And if you are not able to use nitrogen, it doesn't make sense to use potash. But that is only a European issue and that will not impact us because we, at the same time, have to compensate the missing supply from Eastern Europe and we have opportunities out of Europe as well. And I'm not seeing this development in Asia or South America or other regions.

The next question comes from Adrien Tamagno from Berenberg.

Hello. Can you see me, hear me?

Yes.

Yes. Two questions, please. First is, I mean, given the current situation, did you receive some inquiries from large customers about securing a large amount of volumes for a certain amount of time? And would you be happy to do that?

Customers are very active nowadays and talk to us to compensate here and there, so it's -- that's another part that I mentioned with dynamic. Of course, I wouldn't like to raise names, but currently see the -- many opportunities are raising for us.

Okay. Understood. And is it too early to say or you would start to expect to risk a bit more the long-term production outlook out of Belarus and Russia given the sanctions? Like, if their production growth is restricted because their supply chain is becoming more difficult to source, yes, do you see that coming? Or is it too early to say?

I'm not sure if I fully understand your question. Can you please repeat it?

Yes. Basically, I'm saying that do you expect the long-term production outlook, production growth out of Russia and Belarus being risked because of the current situation?

Okay, now I got it. And of course, it depends on how long you're looking into things, but I'm sure even if the war situation is over, and I hope this will be the case soon, it will take 2 to 3 years before we see a normal behavior anymore. So there should be a tightness in the market for quite a while. And the same is true for agriculture products. We shouldn't forget that Russia, Belorussia and especially Ukraine is good for 1/3 of the worldwide production of some very important agriculture products. Before that comes back to normal and the pipeline is filled again, we are talking about another 2 to 3 years. So pricing in the agriculture segment will be high for quite a while, and this will be a challenge for the world to ensure to feed everybody on this planet. That is what concerns me the most. And I am wondering sometimes why we discuss energy issues less or more, more than the food security.

Next question is coming from Mubasher Chaudhry from Citi.

Two, please. Can you provide some thoughts around where you see the first quarter heading, please? I know you've given the full year outlook, but if you could just provide some thoughts on the first quarter as well, please?

I hope for your understanding that I have -- we have closed 2021 now. We have a guidance for 2022, but we're not guiding single quarters. I would only qualitative say we expect a very good Q1.

Sure. And then coming back to your comments around the order book and being sold out to -- almost through May, is it fair to say that you're booking in volumes today for June, July at today's prices and, therefore, you've got a bit of clarity in where second and third quarter should be heading? I just want to see if that kind of 4 to 5 months' lag is the right way of thinking about the today's spot pricing being baked into the P&L?

Yes. So I think it's well known that the current pricing is taking, for example, Brazil, we always like to talk about Brazil because it's a kind of reference, that we are talking about more or less $900 in Brazil currently. And what we are signing now will be -- we are in March already, will be shipped in June, July, so running into our P&L in the second quarter and partially even in the third quarter. What is happening in the next couple of weeks, again, I have to repeat myself. Things are so dynamic that we cannot rule out anything. The only thing that I would rule out is that the prices are decreasing.

Understood. So you've got -- so okay, just to confirm that you remain positive on the pricing developments into the third quarter? And as it comes back to the original point around investments, the earnings power is kind of far outpacing your thoughts around CapEx investments. I know you've talked about a few things there, but it still leaves you with a reasonable amount of balance sheet part to do things. So I'm just trying to understand your limitations around capacity functions for yourself. And are you seeing any other sort of supply side response from the rest of the world?

Yes, you're correct. Our target is to be investment-grade rated. It's not to have spare cash on our accounts. So if you take that, there is real firepower. And that's why we're evaluating in scenario analyses, which we are doing soon, what our opportunities are raising for us. And then we might take some reactions on that. But it's -- that is still very early. And therefore, a clearer picture than we have -- we all have today had to be developed about what could the world -- it will not be the same anymore, but how could the world look like in the future and what does it mean for our markets and what does it mean for K+S. That's a task we have to do now.

Next question is coming from Markus Mayer from Baader.

I've 3 questions, if I may. I also will ask one by one. The first one is on the purchase of the CO2 certificates for 2026 and 2020 -- 2030. Can you give us a magnitude of what this would mean in terms of spending, given the -- taking the current CO2 price into account?

Yes. Thank you, Mr. Mayer. First of all, we have already started buying because we saw a window of opportunity that the prices came down. But we have not expected, but most probably, it's due to the discussion that energy plans might run longer. So if we would invest at the current price the full amount, we are talking about EUR 300 million. We most probably will invest close to EUR 100 million this year, and then we might pause because even this whole system might be questioned if the situation is escalating. So -- but we are very happy that we have already such a long duration order that we have secured already our production until now 2027 with what we have done in Q1. I think that is much more than other companies have done, and the first part was very cheap from today's perspective.

Okay. Second question would be on your U.S. dollar hedging. An update there would be helpful if you can tell us what would be the magnitude if the dollar would go down or up by $0.01?

Now, it's Julia's time.

Yes. We always said that EUR 0.05 are bringing us EUR 40 million.

That's still the case. And we're normally hedged in the [ brand wise ], yes. Is this still the case for this year or for the next years?

Yes.

Basically, yes. Okay. And what are the brands, what are the levels?

I'm looking to Mr. Bettenhausen. We have to give it to you later, Markus.

Okay. Okay. Good. And then the last question is on CapEx again. You said potentially you'll invest EUR 50 million more for Bethune this year. Can you give us an overall CapEx guidance for this year? And in particular, as of the mid-term CapEx guidance of EUR 350 million, is this still in case and what you said? Or should you also add some more into the EUR 350 million as well?

The number that you have mentioned is still valid. I would like to call it a base number. But if we -- now as we have more opportunities to use cash, if we see that it makes sense to invest EUR 50 million or even EUR 100 million in Bethune for a couple of years, and this -- and the returns are justifying that, we rather would do it. But for the time being, the EUR 350 million is the right base number.

I now also have the answer for the other 2. So the worst case and the best case are, for 2022, worst case is EUR 119 million and best case, EUR 160 million.

Okay. Cool.

The next question is coming from a telephone number, so I don't know the name. Okay. Then we have one more question from Oliver Schwarz from Warburg.

So hopefully this works. Did it?

It does. It does, yes, Mr. Schwarz.

A couple of questions from my side, as usual, one by one. Can you please elaborate [ a bit ] on your dividend policy? I heard that you are wanting to invest in CO2 certificates. We have talked a lot about M&A. But can you shed some light on what you think might be a prudent dividend if your outlook for 2022 is basically correct?

I know that you will not be happy with that answer now, but I have no chance to do more than that. It will be higher than this year. But it would not be very clever to raise numbers without having any discussions with the Supervisory Board before that.

Agreed. Okay. Can you give us some information about the duration of your gas contracts, please? You said you locked in prices for the next 3 years to the extent of 72% and then to 2023, 2024, I guess, that's mainly due to long-running contracts with the respective supplier. Is -- can you give us an indication how long those contracts run on average?

Yes. By the way, these numbers are raised only for Europe. We have other contract in Canada, but I think we have developed or follow money towards the development of the gas price in Canada. It has not moved much, so I think it was fair to have a lower hedge number. But let's stick to Europe. We have contracts which run even longer than '24. If I remember correctly, we are talking about 30% still or still for '25, but I think that's it. We are not having meaningful contracts running more than the next 3 -- 3, 4 years.

Okay. And -- that's maybe a timing, key question, but you said you're willing to invest EUR 100 million in CO2 certificates that will run 2026 to 2030. But in the same sentence, you said you -- the whole system might be in question due to the current situation and how it develops. Is it prudent to invest EUR 100 million if you are not sure that the system as such will be in place in 2026 to 2030?

Thank you very much for that question. I should rather have said it might be paused. I don't think that it will be skipped entirely, but there might be a pause and, therefore, it was very prudent to invest EUR 100 million because we used a window of opportunity. And we should -- but what we should not do is to invest in the entire certificates that we need until 2030 for that reason. Yes. Again, I think it was a very clever move to do what we did.

Okay. We talked a lot about gas. Can you quickly update us on your electricity bill and how that is going to progress?

Electricity, do you have that?

You mean the electricity bill in total?

Yes.

So we had electricity costs in 2021 when you look into our annual report of EUR 236 million. And we said that in 2022, we will see an inflation here of EUR 100 million on top of that. So...

I thought that was -- Julia, was that electricity? Or was that the energy bill we are talking about?

That was the energy bill, but electricity is part of that. So I mean, electricity is produced basically by the cogeneration plants with gas. Yes.

Okay. So you're not getting electricity from, let's say, outside utility companies on top of that?

No. It's -- if you look at the split, it's 98% gas and 2% other energy sources, but no.

Okay. And maybe lastly, I don't want to stretch your patience for too long. Mr. Lohr, when asked about the upper end of the guidance, you related to that there might be cost risks in the second half of this year. Given that the energy bill is not very variable based on your hedging, where is that cost risks you might see? Or where is that coming from basically?

I said cost and availability risk. And the second one might be the bigger one. Availability of energy, availability of supply chain deliveries so that in such a situation, you cannot completely rule out that, for example, truck is not available, train is not available, et cetera. So -- and you have to take that into account. The pure cost risk is manageable, but the second one is difficult to calculate.

But if I get you correctly, the availability you're citing is only in relation to logistics. Did I get that right? Or do you factor in also some risk for -- that maybe Russian gas won't be available in, let's say, in the second half of this year?

You cannot give this scenario a probability of 0, if you're understanding what I mean.

I just want to connect the dots here. When we're talking the lower end of the guidance, is there -- is that based on, let's say, restricted on no availability of Russian gas in the second half? Or is that also only with a probability risk of, let's say, I don't know, somewhere between 1% and 99% in the calculation?

Yes, I think the following will answer that question. If we should be forced to shut down for a couple of weeks due to Russian gas not being available, we would still be in the range. Rather at the lower end, but still be in the range.

Okay. I'll get back into line.

Sorry to come back on Bethune. But just can you give us a picture or idea of how Chinese demand for your Bethune volumes is at present? I just want to get my head around Chinese buying behavior when they see, obviously, the Russian, Belorussian volumes being trended. Are they still interested in Russian volumes?

As we speak, our sales forces are negotiating with them. Price is fixed, volumes is under negotiation now, and we believe that they are very interested to have non-Europe, Eastern European sources as well.

There's no question in the Teams and no from here, so I hand back to Dr. Lohr for the closing remarks.

Yes, thank you very much again to be -- to have time for K+S in these very strange times. It was good to have you here in Frankfurt or in the different lines. Thank you very much for being interested. I think it was obvious that K+S is looking ahead positively, although times are difficult. And I'm looking very forward to see you, hopefully, all very healthy and in good condition soon again. Thanks. Bye-bye.