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

Welcome to the K+S Second Quarter 2026 Earnings Call. I will now hand over to Julia from K+S for few technical notes.

Ladies and gentlemen, also from my side, welcome to our call. We hope you've had a chance to review our posted slides as well as our H1 documents available on our website. After the opening remarks by Christian, we will jump directly into the Q&A session.

Thank you, Julia, and welcome from my side as well. Let's start with the quarter. Q2 EBITDA was significantly above the last year's Q2 at about EUR 176 million. This was mainly due to the higher ASP, higher volumes and cost discipline, offsetting the pressure from price-related cost increases resulting from the geopolitical environment. Please remember that we had part of the regular Bethune maintenance rate in Q2 last year and will have it fully in the third quarter this year. Therefore, this did not weigh on the second quarter this year as it did in 2025. Furthermore, Q2 last year, was burdened by negative noncash valuation effects on receivables related to the U.S. dollar. In the Industry+ segment, following the strong start into the year, performance continues to exceed expectations in the second quarter, even if seasonally on a lower level. Free cash flow, free cash flow reached EUR 40 million. It improved versus last year, but not in the same magnitude as EBITDA due to a higher tie up in working capital, mainly receivables. Let's look at the full year guidance. We raised our 2026 EBITDA forecast to range from EUR 680 million to EUR 760 million compared to EUR 630 million to EUR 730 million before. This is mainly due to the strong performance in the second quarter. Midpoint is in line with Wawa Consensus that shows that the positive deviation in Q2 results is mainly due to the periodical shift between Q3 and Q2, also among others, but describe the full maintenance effect. The midpoint of the EBITDA range assumes stable potash prices on average during H2. Current market price levels for logistical costs. And a gas price of USD 45 per megawatt. We also raised our free cash flow guidance from at least breakeven to mid- to higher double-digit million Euro amount which is also in line with Vara consensus. After this brief introduction, I'm now looking forward to answering your questions with my colleague, Jens and Julia. And with this, I hand over to the operator to start the Q&A session.

[Operator Instructions] This brings us to the first question of question, Christian.

Congrats on the results. I have 2.5 questions. I'll ask the first one. First of all, how is the current demand in Brazil heading into the application season in your observation? What are your salespeople saying on the ground? .

Brazil, we saw in the first half of the year, record imports and good application Currently, as we are in between this year the seasons, we see good inventories, but we expect for the second half of the year, at least a normal demand in Brazil. And also what could have an impact is the challenge with phosphate that could be that the application of potash as it is the most affordable nutrient compared to the others, it could changed the NPK formula a little bit. So for Brazil, we are a little optimistic for the second half.

Great. Now my half question. And I admit it's far hedged, but is there a risk that due to the extreme drought we've seen in Europe? Some culture such as corn might not have taken up the full amount of potash toppings given this year. and hence, farmers might be incentivized to take a potash holiday in '27 in Europe.

No. That's currently not our expectation. Yes, we have drought in Europe. But in different regions, it's totally different. We just discussed this morning. Even if you just 50 kimeters to the north from Caser, the corn is pretty good. in Caser it's not as good, but we don't expect that will have an impact on the application of Potash in Germany.

And Christian don't forget Potash is the nutrient that is responsible for water stress and plants it helps the plants to stand water stress. So the farmer who has not applied potash very well will see that the next field where the farmer has applied for is very well is better. So maybe he has also then learned from that .

Well, let's -- I mean, this year is clearly a stress test indeed. Now my final and third question. Can you elucidate a bit, indeed, talking about low water levels, how they affect production in your minds, particularly on the price, I'm aware that you might have, at some point, cooling water issues or not. Can you lose this a bit?

Yes. As we see low water levels in nearly every river in Germany. We also see this in Ulta River, close to our site. And we need cooling water for our production process as long as we have the wet production process. We switched to a dry process with the Werra 2016 so until 2028, the mid of 2028. We closely monitor for every time the levels in the rivers. And could have an impact, but we are monitoring that's pretty close. And that's with the cooling water we need. With regard to Selinwater, we don't have any impact. We don't expect any impact because we are very prepared.

Our next question comes from the line of David.

It's David Symonds from BNB Paribas. Could I ask de-icing was still above last year in Q2 presumably some inventory rebuild. First question, could you tell me where you think inventories are for deicing into next season? .

Yes, we have also on a lower level because we are not in the de-icing season in Q2, but we still have a good demand and the inventories are pretty low. So we expect for the rest of the year. Refill orders and also for the -- if you have a normal winter, just a normal de-icing demand because there are no buildup of inventories, the other side. I was also wondering whether there might be a shortfall of inventories in the next season? What would that to continue to be rebate the end of this year. I don't know if you think that's the case. .

I think most of the catch up was done in Q2.

Okay. Understood. And then back on the Werra river situation. Could you remind us obviously, 2022 was a very different market in terms of price levels for potash. Is there any guidance you can give on if we saw a repeat of the 2022 shutdown. Just could you remind whether that was saline water and cooling or if it was just cooling again? And secondly, is there anything you can say on the size of that impact at today's potash prices? .

There was no shutdown in 2022. The last shutdown we had was in 2018, and that was fully related to sold water disposal things, and that is why we promote management that much.

Understood. Okay. I think I'm mentioning 2022 because in your annual report, you say if you see a repeat of the 2022 situation there could be a shutdown or some impact. .

Like I said, there was no -- maybe we said if there would be a repeat of the 2018 situation, but to be honest, we have implemented so many measures after 2018 that basically we always said, if there comes another dry season like that, we would not have an impact. Maybe that's due to 1 allowance we were waiting for, I'm not sure, but the large shutdown related to it was 2018.

Our next question comes from the line of Michael.

Michael Schaefer from ODDO BHF. First question is on relative pricing MOP versus specialty. So I'm rather looking for your netback plans and production plans into the second half. How do you see -- or do you do the planning? Or what's the kind of -- is this rather MOP centric? Or are you rather focusing on specialties? How should we think about the netback planning for the second half and the output? .

As you know, we are permanently optimizing our netbacks with our production mix. And what's very important that including in our upside as Werra side, has included potash, sulfur and magnesium. And so we optimize our netback, if we produce SOP on the 1 hand or if you produce MOP and Kissei is a cypermagnesium product. On the other hand, so we optimize if we get a higher netback in Kiewit or an SOP for the sulfur, especially due to the good price development in sulfur. And so that's finally a week-by-week decision.

Okay. Second question is on your outlook statement. At the midpoint, you are still baking in something like EUR 45 per megawatt hour net gas. Price for the remaining 30% open exposure. And so I wonder, I mean, currently, we have 60 at spots. However, we are below 40% at 1 year forward. So I wonder how you see kind of gas price risk on your side or gas cost risk, let's say, heading into '27? So are you hedging looks like? And how you're progressing here? .

Very important is what you just mentioned that we only have an open position of 30%, 70% are hedged. We only have a half year to go until the end of the year. yes, we included EUR 45 per megawatt hour for our midpoint. The volatility would also address that we also expect for the second half of the year. But even if you calculate the EUR 60 for the rest of the year, that would have an impact of EUR 1 digit million amount to our calculations. So we are well positioned with our gas strategy.

And '27 hedging so far? .

We have hedged 50% for Europe at a slightly lower price than this year. And for Canada, we were able to manage to hedge 88% at a very nice pace.

Okay. And my final short question. On your trading revenues, EUR 46 million rather elevated compared to historical levels. So just give us a bit of a background. Was there any kind of meaningful earnings contribution from that end? Or was it just a pass-through?