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K+S(SDFGR NR/BBB-/NR): Deal Roadshow Notes

BASIC INDUSTRIES

Hard to look past the underlying volatility and past difficulties experienced by the issuer, despite assurances that issues have been resolved. Expecting a premium on this one.


• Potash miner, 5th largest globally according to the presentation.• Potash prices are the biggest driver of EBITDA, which is a volatile commodity. Prices suffered in 2019/2020 when low crop prices disincentivised farmers to use fertilizer.

• EBITDA has ranged from €640mn-2.43bn in the past 5 years; 2023 €712mn.

• The S&P rating fell to B in 2020 with leverage hitting 7x. Debt taken on to fund the Bethune mine compounded low prices and operational issues, creating a perfect storm. The rating rebounded with a 3-notch upgrade in 2022 following the sale of Americas salt assets removing net financial debt.

• The company highlights 39% revenue in fertilizer specialties which is slightly more value added. They also have a diverse customer / application base.

• At FY23 K+S had a net cash position, adjusted for mining liability provisions leverage was 1.7x. It targets 1.5x maximum.

• Policy is to return 30-50% of adj. FCF to shareholders.

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