Our outlook for 2020
The current high volatility in potassium chloride prices in the overseas regions makes it particularly difficult to forecast earnings. Against this background, EBITDA of the K+S GROUP is expected to be between € 500 million and € 620 million (2019: € 640.4 million).
Our assessment for full-year 2020 is mainly based on the following assumptions:
+ Based on our assessment of market conditions in the Agriculture customer segment, which is allocated to the Europe+ operating unit, we anticipate that average prices for potash and magnesium fertilizers in our portfolio will be slightly lower in 2020 as a whole than in the fourth quarter of 2019 (€ 255). This will require the price development for the customer segment Agriculture described in the future industry situation.
+ Due in particular to the resumption of normal production in Germany and the continuing ramp-up in Bethune (no production cuts), the sales volumes for all products in the Agriculture customer segment is expected to amount to more than 7 million tonnes (2019: 6.30 million tonnes).
+ Owing to the generally very poor start in the de-icing salt business for weather-related reasons, we expect sales volumes between 8 and 9 million tonnes for the 2020 financial year (normal year: between 12.5 and 13.0 million tonnes; 2018: 12.7 million tonnes) in the Communities customer segment, which is allocated to both operating units according to the regional breakdown.
+ An average spot rate of USD 1.12/EUR (2019: USD 1.12/EUR) has been assumed for the EUR/USD exchange rate. In the Europe+ operating unit (segment within the meaning of IF RS 8), higher sales volumes in the Agriculture customer segment following the previous year’s production cuts should stand against negative price effects. Depending on further market trends in the Agriculture and Communities customer segments, EBITDA performance is expected to range between a tangible decline and stable (EBITDA Europe+ in 2019: € 437.0 million). Given the below-average overall performance of the de-icing salt business, EBITDA of the Americas operating unit (segment within the meaning of IF RS 8) is expected to decrease slightly to tangibly (EBITDA Americas in 2019: € 230.0 million).
The following key figures follow the described EBITDA corridor:
We expect that adjusted Group earnings after tax will decrease significantly for reasons that include higher depreciation (2019: € 77.8 million).
Although the capital expenditure of the K+S GROUP should be significantly higher in 2020 than in the previous year (€ 493.3 million), in particular as a result of the continuing expansion of our tailings pile capacities in Germany, we expect the adjusted free cash flow to break more or less even at the midpoint of the EBITDA range (2019: € +139.7 million) because of further planned measures to improve working capital. The return on capital employed (ROCE ) is expected to be down significantly (2019: 2.3%).
Should the level of net financial liabilities be unchanged compared to year-end 2019 (€ 3,116.6 million), the ratio of net financial liabilities in relation to EBITDA at the end of 2020 would increase moderately to tangibly (2019: 4.9x) depending on the described EBITDA range. The level of net financial liabilities at the end of the year depends on when our package of measures to reduce debt will become effective.
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.