K&S : EBIT I in second quarter 2016 significantly below previous year

27 June 2016

K+S Aktiengesellschaft

On the basis of preliminary figures, EBIT I for the K+S Group results to around € 10 million in the second quarter 2016 (Q2/15: € 179.2 million).

Reasons for the deviation are a significantly lower average selling price in the potash and magnesium products business unit and unexpectedly high production outages due to the limited deep-well injection permit for liquid residues at the Werra plant. In the business unit Salt lower pre-buying sales for de-icing products led to a significant volume decline primarily in North America.

'A deceiving second quarter for K+S, marked by very difficult market conditions. Production limitations have left important traces, too. To minimize further effects in the course of the year we are working intensely on unconventional solutions,' says Norbert Steiner, CEO of K+S Aktiengesellschaft.

Saline Wastewater Disposal Remains a Challenge

From today's perspective, the review of the application submitted by K+S in April 2015 concerning the continuation of deep-well injection until the end of 2021 will remain ongoing. K+S expected at the end of 2015 a review to be completed in the summer of this year. In connection with the current transitional permit saline wastewater can be injected underground only to a very limited extent.

The disposal of production and tailings pile wastewater is closely based on the water flow of the Werra, into which saline wastewater can continue to be discharged provided that approved threshold values are adhered to. At a low level of water flow less amounts can be disposed into the Werra river.

With the start of those months that saw low rainfall in particular, temporary production curbs at individual sites of Werra plant were unavoidable, despite efficient wastewater management using existing storage basins. Since the beginning of the year, production had to be suspended at the Unterbreizbach (Thuringia) and at the Hattorf (Hesse) site for a total of 49 days. This resulted in a production shortfall of more than 400,000 tons, which cannot be caught up from today's point of view. Therefore supply shortages cannot be ruled out within the following months. For the employees of the Werra plant, which stands for about half of the domestic potash production, a works agreement on short-time working has been concluded with the group-wide works council. Some 1,000 employees were affected at the height of the suspensions so far.

Measures for the Short-Term Securing of Production

For maintaining production during the dry summer months along with what can be expected to be a lower Werra flow of water and the limited availability of injection volume, the Company is currently conducting an intensive review of the implementation of additional measures to dispose of wastewater. A key element is temporary disposal in areas located away from the sites using truck and rail transportation.

In addition, an intensive review is being conducted into the storage of saline wastewater underground to be able to already make use of the possibilities for what is at least a temporary measure.

These additional measures and continued efficient management of available basin capacity give the Company greater flexibility to expand wastewater management during the dry summer months and to secure production at the Hesse and Thuringia sites.

Extensive Environmental Measures

K+S wants to find a long-term solution to the Werra disposal issues and has done a great deal over the past few decades to improve the Werra and Weser environmental situation: Between 1997 and 2015, the volume of saline wastewater declined from 20 million m³ per year to 7 million m³ per year. The Company invested around € 400 million on this between 2011 and 2015 alone as part of our package of water protection measures. And there will be more to come:

Including a kainite crystallization and flotation facility (KCF) on which construction work has already started and which will lead to another significant reduction of a good 20 per cent in quantities of saline wastewater to 5.5 million m from 2018 onward. About € 165 million will be spent on this project alone until it is completed.

The covering of tailings piles is also being looked into. If large-scale tests confirm the many years of experience gained at the Company's Lower Saxony sites, the grassing and planting of the Werra tailings piles could start from about 2025. It would mean that very little saline wastewater would occur over the long term. In addition, over the next few years, the Company will conduct intensive research into and determine whether saline wastewater can be securely stored underground on a scale that has not been realized anywhere in the world to date. The findings of the relevant study should be available by the end of 2018.

Furthermore, a project group is already working on drawing up planning principles for the supplementary long-distance pipeline needed on the Upper Weser; the relevant regional planning procedures are currently pending. Should the planned Upper Weser long-distance pipeline be completed by the end of 2021 and commissioned, then it will be possible to dispense with injecting from then on. That is the goal for K+S.

Today, however, deep well injection as a means of disposal is still needed in addition to discharging into the Werra: It is an important element in bridging the gap to the future.

About K+S

K+S is an international resources company. We have been mining and processing mineral raw materials for more than 125 years. The products we produce from them are used worldwide in agriculture, food and road safety and are important elements in numerous industrial processes. Potash and salt are integral nutrients for the megatrend of a constantly growing and increasingly prosperous global population striving for a higher standard of living. This will result in increasing consumption of mineral resources. We serve the resulting growth in demand from production sites in Europe, North America and South America as well as through a global distribution network. K+S is the world's largest salt producer and one of the top potash providers worldwide. With more than 14,000 employees, K+S achieved revenues in financial year 2015 of about € 4.2 billion and an EBIT of € 782 million. Learn more about K+S at www.k-plus-s.com.

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