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K+S anticipates significant increase in earnings for 2019

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World Fertilizer,

The K+S Group has announced it increased revenues for the 2018 financial year by 11% to €4.0 billion (previous year: €3.6 billion).

EBITDA improved by 5% to €606 million (previous year: €577 million). EBITDA was negatively impacted above all by the prolonged heat wave and severe drought in Germany last year, which led to considerable production losses at the Werra potash plant.

"Despite this headwind, we still achieved an increase in our operating earnings", said Dr. Burkhard Lohr, Chairman of the Board of Executive Directors of K+S. "I see many positive signals for 2019 and am optimistic as a result. Our EBITDA should increase significantly compared with the previous year".

2018 financial year: Revenue growth and EBITDA increase

Larger sales volumes in both business units, in particular from the Bethune potash plant in Canada, as well as higher market prices for potassium and magnesium products had a positive effect on revenues and EBITDA of the K+S Group in the 2018 financial year. By contrast, the weather-related production standstills at the Werra plant burdened Group EBITDA by a total of about €110 million. In addition, costs for the transport of goods rose disproportionately, especially in the Salt business unit.

Adjusted Group earnings after taxes for the 2018 financial year, which form the basis for the dividend, fell to €85 million (previous year: €145 million). This was due to higher interest expenses and the depreciation of the Bethune plant in Canada, which had to be taken into account for a full financial year.

In 4Q18, EBITDA of the K+S Group rose by 22% y/y to €228 million, while revenues rose by 18% to €1.2 billion.

Bethune with positive EBITDA for the first time in 2018

At the Bethune plant, 1.4 million t of potassium chloride were produced for the first time, thereby achieving the production target for 2018. In addition, the plant achieved positive EBITDA for the first time and is still in the ramp-up phase.

Outlook 2019: Significant increase in EBITDA and positive free cash flow expected

K+S is looking positively at 2019 and expects EBITDA to be significantly higher than last year's and in a corridor between €700 million and €850 million (2018: €606 million). The main reasons for this are the favourable market environment for fertilizers, the continued ramp-up of the Bethune site, the continuation of measures to improve operating performance as well as the expectation that the wastewater-related production stoppages at the Werra plant will not recur. Despite the closure of the Sigmundshall site in Germany, K+S expects potash production to rise in 2019 compared with the previous year.

Higher payout ratio

The earnings-oriented dividend policy of K+S is essentially reflected in a payout ratio of 40 to 50% of adjusted Group earnings after taxes. Given the positive view on 2019, The Board of Executive Directors and the Supervisory Board intend to propose a dividend of €0.25 per share (previous year: €0.35 per share) to the Annual General Meeting on 15 May 2019. Against this background, the payout ratio of 56% (previous year: 46%) is slightly above the usual range.

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