Our outlook for 2019

Our assessment for 2019 as a whole is based primarily on the following assumptions:

• A changed product mix is counteracting a positive market environment in the Agriculture customer segment, which is attributable to the Europe+ operating unit, so that we expect a moderately rising average price for potash and magnesium fertilizers in our product portfolio for 2019 as a whole (2018: € 255/t).
• The expected sales volume of all products in the Agriculture customer segment should be between 6.9 and 7.2 million tonnes (2018: 6.8 million tonnes), in particular as a result of the higher production volume at the Bethune site. Assuming a normal hydrological year for 2019, no disposal-related production restrictions due to longer low water periods are to be expected in the Werra. The measures we have already taken to further improve our wastewater management and our efforts to expand local storage capacities should significantly reduce the risk of shutdowns even in the event of prolonged drought. Our challenges at the Werra and Neuhof plants are being addressed and product availability has already improved. Nevertheless, we expect that the German sites will still lag behind the technically possible capacity in 2019.
• In 2019, our production costs in the Agriculture customer segment will still be burdened by logistics costs of about € 40 million, primarily as a result of the continued use of the remote disposal of saline wastewater.
• As a result of the average start of the de-icing salt business as a result of weather conditions overall, we expect sales volumes of between 12.5 and 13.0 million tonnes (2018: 13.3 million tonnes) for the 2019 financial year in the municipal customer segment, which can be allocated to both operating units in accordance with the regional breakdown. As usual, this forecast assumes that our sales of de-icing salt will remain at the long-term average level.
• An average spot rate of EUR 1.20/USD (2018: EUR 1.18/USD) is assumed with regard to the euro-dollar exchange rate.

We expect revenues of the K+S GROUP to increase moderately in financial year 2019 (2018: €4.04 billion). The EBITDA of the K+S Group should improve significantly to between €700 million and €850 million1 (2018: €606.3 million). In the Europe+ operating unit (segment in accordance with IFRS 8), the further increase in production at our new Bethune potash plant in Canada in particular as well as the expected discontinuation of production interruptions at the Werra plant due to wastewater should have a positive effect, with the result that revenues here should be moderate and EBITDA significantly higher (2018 revenues: €2.60 billion, EBITDA: €443.4 million). Meanwhile, sales and EBITDA of the Americas operating unit (segment according to IFRS 8) should remain almost stable (sales in 2018: €1.46 billion, EBITDA: €221.7 million). With an average de-icing salt business, higher product prices should be offset by cost inflation.

(Status: March 14, 2019)

¹Including a positive effect from IFRS16.

Although the investment volume of the K+S GROUP in 2019 should be higher than in the previous year (€443.2 million), in particular as a result of further expansions of our tailings pile capacities in Germany, the adjusted free cash flow should improve significantly compared with the previous year as a result of our operating improvements and active working capital management and be positive again for the first time since 2013 (2018: €-206.3 million). Despite a higher capital commitment, the return on capital employed (ROCE) is expected to rise significantly (2018: 2.6%) due to the expected significant improvement in earnings. At the operating unit level, ROCE for Europe+ is expected to rise significantly (2018: 2.0%), while for the Americas it is expected to be well below the previous year's level (2018: 7.9%).

Our earnings-oriented dividend policy is generally reflected in a payout ratio of 40% to 50% of adjusted Group earnings after taxes. Since, as described above, we have a positive outlook for 2019, the Board of Management and Supervisory Board intend to propose a dividend of €0.25 per share (previous year: €0.35 per share) to the Annual General Meeting on May 15, 2019. Against this backdrop, the payout ratio of 56% (previous year: 46%) of adjusted Group earnings after taxes is slightly above the range of the dividend policy described.