Presentation of Karl Mielke, CEO K+S North America Salt Holdings ...

Capital Markets Day 

Salt Perspectives 

Karl Mielke 

CEO K+S North America Salt Holdings LLC 

Berlin, 8 December 2010 

Experience growth.

Salt 

Content 

A. Salt Market Environment 

B. The K+S Salt Business 

C. K+S’ Position in Competitive Environment 

D. Growth Perspectives & Strategy 

December 2010 K+S Group 1

No Life without Salt! 

Salt is… 

… a fundamental component of our life 

These are the following main production methods of salt: 

Rock Salt 

Sea-/Solar Salt 

Evaporated Salt 

Brine 

Conventional 

mining 

Crystallisation 

from sea water 

Recrystallisation 

of purified brine 

Controlled 

borehole-brining 



Details of the Market for Salt for Chemical Use 

• Largest salt product market with global 

chemical industry consuming approx. 150 Mt 

per year as feedstock 

• Main applications: 

• chlor-alkali industry (→ PVC) 

• synthetic soda ash production (→ glass) 

Electrolysis 

facility 

• Key demand drivers: 

• GDP growth 

• urbanization 

• Success factors: 

• efficient sourcing and logistics network 

• reliant delivery capacity 



Details of the De-icing Salt Market 

• Clients are mainly municipalities and other public 

authorities 

• Contract award is mainly based on public bidding 

process 

• Main application: 

• salt used as de-icing agent for highway safety 


• winter weather conditions 

• infrastructure development 


• efficient sourcing and logistics network 

• delivery capacity 



Details of De-icing Salt Bidding Processes 

defined by 

Details specified in typical 

bid document 

volume 

destination 

delivery 

product and service 

specifications 

guaranteed minimum 

purchase requirement 

maximum delivery 

requirement 

price 

vendor purchaser 

• Government de-icing contracts are awarded in 

Europe, the US and Canada in the form of public 

bids 

• Government purchaser issues bid documents in 

late spring/early summer 

• Vendors hand in sealed bids, which will be 

opened at date and time specified in the bid 

documents 

• Lowest priced bid that satisfies all requirements 

will be awarded 

• In the US, Canada and most parts of Europe, all 

vendor’s bids will become public 

• In the US most bids are valid for one year/season 

• In Canada and some parts of Europe contracts 

might be awarded for a duration of up to 4 years 



Details of the Food Grade Salt Market 

• Main applications: 

• table salt (Consumer) 

• food processing 


• population growth 

• eating habit 


• high quality standards 

• marketing/branding 

(especially in North and South America) 

• supply chain efficiency to fulfil customer 

requirements 

• Current situation: 

Within the US and some European countries 

increasing political pressure to reduce the 

consumption of sodium 



Industrial/Other Applications of Salt 

The industrial salt market comprises different 

high-value applications: 

• Pharmaceutical 

• Highly regulated, high-margin segment 

• Main use in infusion and dialysis solutions, as 

well as cosmetics and drugs 

• Water softening 

• Used in municipal and private household 

water treatment 

• Oil and gas drilling 

• Salt used as drilling agent in oil and gas 

exploration 

• Animal feed 

• Animal feed salts serve as raw ingredient to 

industrially assembled feed mixes 

December 2010 K+S Group K+S Group 7


Main End Uses for Salt 

• Salt has more than 14,000 different applications 

• Salt prices vary from approx. 40 US$/t (certain chemical salts) to approx. 1,000 US$/t 

(pharma salt) 

• Main applications of salt are: input for chemical processes, food grade and de-icing 

North America 

(Consumption 2007: 69 million tonnes) 

Global 


Industrial/Others 

10.0% 

De-icing 


14.0% 

Asia 


Europe 


Food 

Grade 


17.5% 

Sources: Roskill 2007, K+S 

Salt for 

Chemical 

Processes 

58.5% 

South America 




Main Salt Suppliers Worldwide 

Capacity in million tonnes (crystallised salt and salt in brine; excl. captive use) 

3.5 

13.1 

14.4 

14.0 

9.7 

18.7 

Compass 

Cargill 

7.5 

Artyomsol 

5.3 

4.1 

Südsalz 

Salins 

3.6 

Akzo 

China National Salt 

7.0 

ESSA 

9.0 

7.0 

Dampier 

3.8 

Mitsui 

Sources: Roskill 2007, K+S 



Content 




C. Growth Perspectives & Strategy 



Steps in Developing the K+S Salt Business 

5 

Acquired Morton Salt, 

the largest salt producer 

in North America 

K+S 

4 

Morton 


Acquired No.1 salt 

producer in South 

America through SPL 

acquisition 

- Market entry into U.S. 

and Latin America 

SPL 

1 

2 

3 

Originally, salt 

business with high 

exposure to de-icing 

and industrial salt in 

Europe 

Added salt for chemical 

use through the acquisition 

of Frisia Zout (NL) 

Created No.1 salt 

producer in Europe 

through the acquisition 

of Solvay salt business 



Strong presence in attractive de-icing regions 

Great Lakes 

• Continental climate with 

a distinctly stable winter 

• High population density 

• Very stable de-icing 

business with high 

quantities 

US – East Coast 

• Atlantic climate 

• Relatively volatile, to 

some extent severe 

winters 

• Very high population 

density 

• Stable de-icing 

business 

Eastern Canada 


• Relatively stable winters 

• Low population density 

• Stable de-icing business 

• Long-term contracts 

Western Europe 


• Rather mild winters with 

cyclic upward swings 

• Very high population 

density 

• Relatively cyclic deicing 

business 

Scandinavia 

• In comparison to 

Western Europe, 

stable winters 

• Relatively low 

population density 

• Relatively stable 

de-icing business 



Balanced Product and Regional Portfolio 

Revenues by product group 

De-icing salt 

40% 

Other 

4% 

2005 

Food grade salt 

18% 

Industrial salt 

31% 

Salt for chemical use 

7% 

De-icing salt 

39% 

Other 

5% 

9M/2010 


20% 


31% 


5% 

Product mix: 

The very balanced 

product mix could be 

maintained over the 

years, even after 

acquiring SPL and 

Morton Salt. 

2005 

Overseas 1% 

Rest 

of Europe 

54% 

Revenues by region 

Germany 

45% 

Overseas 72% 

9M/2010 

Germany 

13% 

Rest 

of Europe 

15% 

Regional mix: 

The strong dependence 

on Europe could be 

diversified towards a 

more balanced regional 

mix with overseas sales 

in particular in the US, 

Canada, Chile and 

Brazil. 



Mitigation of Volatility in De-icing Business 

Sales Volume De-icing Salt ISCO*: 

Sales Volume De-icing Salt Morton*: 

Sales Volume De-icing Salt esco*: 

5,000 

8,000 

4,000 

4,000 

6,000 

3,000 

1.000 t 

3,000 

2,000 

1.000 t 

4,000 

1.000 t 

2,000 

1,000 

2,000 

1,000 

- 

2006 2007 2008 2009 2010e 

- 

2006 2007 2008 2009 2010e 

0 

2006 2007 2008 2009 2010e 

10 year average sales volume (2000 – 2009) * before consolidation of intersegment sales volumes 

1.000 t 

14,000 

12,000 

10,000 

8,000 

6,000 

4,000 

2,000 

0 

2006 2007 2008 2009 2010e 

esco Morton SPL 

The worldwide de-icing salt market 

exhibits varying volatility 

Access to the largest de-icing world 

markets mitigates the overall degree 

of fluctuation in the de-icing salt 

business 

Unique, interregional production 

network (including access to salt 

production from potash facilities) 

allows benefiting from strong demand 

surges at short notice 



Morton Salt Reduces Earnings Volatility 

Million € 

500 

400 

300 

EBITDA of Salt Business Segment 

(without Morton Salt) ≙ esco + SPL 

EBITDA of Morton Salt 

EBITDA of Salt Business Segment 

Standard deviation 

Salt Business Segment (without 

Morton Salt): 42.4% 

Salt Business Segment 

(including Morton Salt): 20.5% 

% 

25 

20 

15 

200 

10 

100 

5 

EBITDA-Margin of Salt Business Segment 

(without Morton Salt) ≙ esco + SPL 

EBITDA-Margin of Salt Business Segment 

(including Morton Salt) 

0 

2000 2001 2002 2003 2004 2005 

0 

2006 2007 2008 2009LTM* 

2011e** 2008 2000 2009 2001 2002 2003 2004 2005 2006 2007 2008 2009 LTM* 

• With the acquisition of Morton Salt, standard deviation of EBITDA more than halved to approx. 20% 

• In addition, Morton Salt reduces volatility in EBITDA margins significantly 

• Furthermore, the level of EBITDA margin is also positively impacted by the acquisition of Morton Salt 

* LTM=Last twelve months as of 30 September 2010; ** Middle of corridor between € 175 to 190 million, the current EBIT potential of the whole Salt business 

segment assuming normal de-icing salt sales at their multi-year average level 



Historical and Recent Volume and Price Development 

Million tonnes Morton Salt (as of 

€ 

25 

1 October 2009) 

SPL (as of 

70 

20 

1 July 2006) 

22 

21 

60 

55.5 

53.4* 

9 

49.1 

48.7 

50 

45.0 45.5 

9 

9 

15 

14.81 

40 

10 

5 

0 

6.07 

2.82 

3.25 

8.02 

3.90 

4.12 

8.77 

4.73 

4.04 

5.85 9.47 

5.00 

4.47 

5.85 

8.96 

2005 2006 2007 2008 2009 2010e 

13 

• Sales volumes increased over the past years mainly due to external growth, while the de-icing salt share 

remained rather stable 

• The price level for de-icing salt was tending upwards over the past years - a trend that might pause in 2010 

• Sales volume 2010e: 22 million tonnes (of which de-icing salt: 13 million tonnes) 

• Sales volume 2011e based on long-term average volumes: 21 million tonnes (of which de-icing salt: 12 million 

tonnes) 

* Average selling price in 9M/10 

December 2010 K+S Group 16 

12 

2011e 

30 

20 

10 

0 

De-icing salt sales volume 

Sales volume of industrial salt, 

salt for chemical use and food grade salt 

Yearly average price of de-icing salt


Cost Situation 

• Personnel 

• Annual work-time accounts in Germany make high degree of flexibility possible 

• Performance-related salary component, in Germany applicable to all employees 

• Personnel exchange with Potash and Magnesium Business Segment possible 

• Seasonal adjustment of workforce in America possible 

• Energy 

• One site in the Netherlands will switch to using steam from a substitute fuel heating plant 

in 2011 

• Continuous technical improvements and investments 

Outlook: energy cost increases will be mitigated in the medium-term perspective due 

to the above-mentioned measures 

• Freight/Logistics Salt Supply 

• Own shipping company with global market knowledge and six own vessels 

• Medium-term sea freight contracts and freight hedging 

• Determination of group-wide most efficient sourcing 

Outlook: lower sea freight and synergies in ground freight expected 



Capex/Depreciation History and Outlook (2013) 

Million € % 

150 

200 

125 

175 

150 

100 

125 

75 

100 

50 

25 

0 

2004 

2005 2006 2007 2008 2009 2010e 2011e 2012e 2013e 

75 

50 

25 

0 

Capex (lhs) 

Capex/depreciation incl. 

ppa depreciation (rhs) 

Capex/depreciation excl. 

ppa depreciation (rhs) 

• Capex increased following the acquisitions of SPL in 2006 and Morton Salt in 2009 

• Temporary increase in capex/depreciation ratio caused by investments in ships and harbour facility in Chile 

• PPA depreciation lowers capex/depreciation ratio. Without PPA, the ratio will fluctuate around 100% 



Content 







Competitive advantage 

Production 

network and 

Know-how 

Logistics 

network 

Product 

portfolio 

• Geographical diversification of production facilities within a region and 

across continents 

• Access to multitude of technical and geological experts within the 

K+S Group 

• Mixture of own ships, medium-term sea freight contracts and 

freight hedging 

• Utilisation of global logistic knowledge of K+S Group 

• Close supply chain cooperation for most efficient group-wide 

sourcing 

• Balanced and less cyclical product portfolio 

• Product innovations through access to group-wide 

R&D network 



Unique Production Network / Excellence in Logistics 



Comparison of Portfolios with Competitors 

K+S 

China National 


Compass 

Minerals 

Dampier 


Number of production sites 

of which 

34 

14 

8 

3 

Rock salt 

10 

3 

Solar evaporation salt 

7 

4 

1 

3 

Vacuum salt 

17 

10 

4 

Product portfolio (% of sales volume, K+S: LTM as of 30 September 2010) 

De-icing salt 




Other 

 

 

 

A diversified production network reduces the risk of dependence on a single production centre 

and sales region 

Geographical diversification of production centres makes regional production close to 

customers possible and helps to optimize logistical costs 

A broad product portfolio reduces the volatility of revenues and earnings 

Source: company information, own estimates 



Content 







Regional Growth Perspectives – North America 

Overall stable growth prospects 

• Chemical: 

• New construction of chlor-alkali facilities in progress in the US 

• Recently established chlorine transportation regulation will lead to smaller plants close to 

sea ports and point of demand, easily accessible by vessels 

K+S will benefit through its extensive production network 

• De-icing: 

• Ongoing infrastructure development 

Through its presence in major de-icing regions, Morton and ISCO are well 

positioned to capture additional demand 

• Food: 

• Sodium intake debate will spur demand for innovative low sodium products and sea salts 

K+S is the only salt producer that can offer a wide range of sea salts as well as an 

in-house solution to consumers and clients, which is a blend of Salt and KCl 



Regional Growth Perspectives – Europe 

• Chemical: 

• Limited market growth 

esco will commit more capacity to strongly growing salt specialities 

• De-icing: 

• Ongoing infrastructure investment in Europe 

esco mine Bernburg well located to capture strong growth in selected markets 

in Eastern Europe 

• Industrial: 

Market growth mainly within salt specialities segment 

• Strong market growth in industrial speciality segments 

Redirection of vacuum salt capacity to capture growth in high-margin salt 

specialities 



Regional Growth Perspectives – South America 

Overall strong market growth prospects 

• Chemical: 

• New chlor-alkali projects in Central and South America 

• Food: 

• Market growth in line with population development 

• Industrial: 

• Strong market growth in industrial specialty segments 

 

Production facilities in Chile and Brazil are optimally located to deliver growth 

markets in South America 



Regional Growth Perspectives – Asia 

Overall very strong growth prospects 

• Chemical: 

• Local chlor-alkali capacities to grow at estimated 2 million tonnes per year 

• De-icing: 

• Infrastructure development and road safety concerns will foster development of local 

de-icing market 

• Food: 

• Change of eating habits is driving strong growth in processed food 

 

K+S is studying long-term options of how to participate in selected, attractive segments 



Current and Medium-term EBIT Potential 

Million € 

250 

Reasons for profitability growth: 

200 

150 

100 

175 - 190 

• Growth in high-margin 

specialities 

• Growth in adjacent markets 

• Improvements in energy 

efficiency 

• Logistics flow optimizations 

• Other business synergies 

50 

0 

Current EBIT potential assuming 

normal de-icing salt sales at their 

multi-year average level 

Medium-term EBIT potential 



Strategy of the Salt Business Segment 

Growth 

Market 

Optimisation 

Optimisation of current 

business 

Strategic Focus 

Entry into new regional markets 

Strengthening of positions in existing 

and adjacent markets 

Optimal resource utilisation by 

constantly optimising the current 

network and structures 

Short-term mid/long-term 


K+S Group 

Forward-Looking Statements 

This presentation contains facts and forecasts that relate to the future development of the K+S 

Group and its companies. The forecasts are estimates that we have made on the basis of all the 

information available to us at this moment in time. Should the assumptions underlying these forecasts 

prove not to be correct or should certain risks – such as those referred to in the recent Risk 

Report – materialise, actual developments and events may deviate from current expectations. The 

Company assumes no obligation to update the statements contained in this presentation, save for 

the making of such disclosures as are required by the provisions of statute. 

December 2010 K+S Group K+S Group 30

K+S Aktiengesellschaft 

Bertha-von-Suttner-Straße 7 

34131 Kassel | Germany 

phone: +49 (0)561 / 9301-0 

fax: +49 (0)561 / 9301-1753 

Investor Relations 

phone: +49 (0)561 / 9301-1100 

fax: +49 (0)561 / 9301-2425 

email: 

investor-relations@k-plus-s.com 

Internet: www.k-plus-s.com 

Experience growth.

Presentation of Karl Mielke, CEO K+S North America Salt Holdings ...

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