Knowledge

Financial Glossary

Definition of key financial indicators

B

Book Value per Share

Book Value per Share = Equity / Total number of shares as of Dec. 31

C

Cash flow

Net balance of incoming and outgoing payments during a reporting period. The cash flow provides information about the earning and financial power of a company.

Compliance

Compliance (conforming with regulations) denotes adherence to mandatory laws, internal regulations, and regulatory standards recognized by the company. A compliance management system is intended to ensure compliance and avoid penalties and fines resulting from breaches of compliance and claims for damages as well as other direct or indirect negative influences (caused particularly as a result of damage to image), by identifying and evaluating compliance risks promptly and taking steps to reduce the likelihood of materialization and their loss potential. Moreover, structured internal compliance reporting should be ensured.

Cost of Capital

Also WACC (weighted average cost of capital); denotes the opportunity costs arising for equity providers and/or lenders through capital made available to the company. The weighted average cost of capital rate is calculated from the aggregate of the expected returns of equity providers in terms of their equity share as well as the interest on debt in respect of the share of interest-bearing debt in total capital. As this is considered from an after-tax perspective, the average interest on debt is reduced by the corporate tax rate.

D

DEBT I

DEBT I = Bank loans and overdrafts / Equity

DEBT II

DEBT II = Net debt / Equity

E

Earnings before operating hedges

Earnings before operating hedging transactions comprise the operating result, including the result from realized operating hedges, adjusted for market value fluctuations of hedges that have not yet matured. Market value fluctuations of hedging transactions that have not yet matured are thus eliminated.

Earnings after operating hedges (EBIT - Earnings before interest and taxes)

Earnings after operating hedging transactions include all results from operating hedging transactions, i.e. both valuation effects as of the balance sheet date and results from realized operating hedging derivatives.

EBITDA (Earnings before interest, taxes, depreciation and amortization)

Is intended to enable comparisons of operational earnings power between companies and describes the profitability of companies. K+S calculates EBITDA based on earnings before operating hedges plus depreciation and amortization of property, plant and equipment and intangible assets; EBITDA is adjusted by the depreciation and amortization amount not recognized in profit and loss in the context of own work capitalized, earnings arising from changes in the fair market value of outstanding operating anticipatory hedges, changes in the fair value of operating anticipatory hedges recognized in prior periods, and in the prior year profit/loss from currency hedging for capital expenditure in Canada.

EBITDA Margin

EBITDA Margin = EBITDA / Revenues

Enterprise Value

Enterprise value is an indicator frequently used to determine the value of a company. It is often related to other indicators (for example, revenues, EBIT).

Enterprise Value = Market capitalization + net debt

F

Free Float

The number of shares not held by major shareholders owning more than 5% of the shares of a company (with the exception of shares held by investment companies and asset managers).

G

Greenhouse Gas (GHG) Protocol

The Greenhouse Gas Protocol is a tool for calculating and managing the greenhouse gas emissions of companies and organizations. It includes direct emissions from core corporate areas (Scope 1), indirect emissions from the use of purchased electricity, heat, and steam (Scope 2), and indirect emissions, which are upstream or downstream of corporate activities (Scope 3). To compare the global warming potential of different greenhouse gases, each greenhouse gas is converted in CO₂ equivalents. A CO₂ equivalent has the same global warming potential as one unit of CO₂.

GRI - Global Reporting Initiative

The Global Reporting Initiative is an independent ¬international multi-stakeholder organization that develops cooperatively a framework for global sustainability reporting. The GRI reporting guideline specifies principles and indicators for organizations to measure their economic, environmental, and social performance. The purpose is to promote transparency and comparability for sustainability reports.

Gross Cash Flow

Gross Cash Flow = Earnings before operating hedges + write-downs/- write-ups on intangible assets, property, plant and equipment and financial assets + increase/- decrease in non-current provisions (without interest rate effects) + interests and dividends received and similar income + gains/- losses from the realization of financial assets/liabilities - interest paid – income taxes paid + other non cash expenses - other non cash income

I

Integrated Reporting

Integrated reporting is a standard concept that combines traditional financial reporting with non-financial reporting elements. The focus should be the company’s business model and its strategy. The aim is reporting which considers all the stakeholders’ interests. The goal is to reflect the interdependencies between environmental, social, governance, and financial factors of decisions, which influence a company’s long-term financial performance and position, by clarifying the connection between sustainability and economic values.

N

Net Financial Liabilitites

Financial liabilities - cash on hand and balances with banks - securities and other financial investments

Net Debt

Net Debt = Financial liabilities + provisions for pension and similar obligations + non-current provisions for mining obligations - cash on hand, and balances with banks - securities and other financial investments

O

OECD Guidelines for multinational companies

The OECD guidelines for multinational companies are government recommendations for the multinational companies that operate in or from the member states. They contain non-legally binding principles and benchmarks in the areas of basic obligations, information policy, human rights, employment policy, environmental protection, anti-corruption, consumer interests, science and technology, competition, and taxation.

Operating Assets

Operating Assets = Intangible assets⁴ + property, plant and equipment + shares in affiliated companies + participating interests

Operating forecast hedges

To hedge future currency positions (mainly in US dollars), we use operating derivatives in the form of options and futures (see also transaction risks).

R

Rating

Rating agencies award ratings on a company’s ability to meet its future interest and repayment obligations in a timely manner in the form of standard categories.

Return on Capital Employed (ROCE)

Return on capital employed (ROCE) is a financial ratio that measures a company’s profitability and the efficiency with which its capital is employed.

Return on Capital Employed (ROCE) = Earnings before operating hedges / (Operating assets + working capital^{2, 4})

Retrun on Equity

Retrun on Equity = Adjusted Group earnings after tax¹ /
Adjusted equity^{1, 2}

Return on Revenues

Return on Revenues = Adjusted Group earnings after tax¹ / Revenues

Return on Total Assets

Return on Total Investment = (Adjusted earnings before tax¹ + interest expenses) / Adjusted balance sheet total^{1, 2, 3}

S

Stakeholder

Stakeholders are interest groups in the working environment or in an organization who are directly or indirectly affected by corporate activities, currently or in the future, and are thus in an interdependent relationship. They include employees, customers, investors, suppliers, local residents, and policymakers.

T

Transaction risk

A transaction risk is a currency risk that may arise in connection with existing receivables or liabilities in a foreign currency if a transaction in a foreign currency is to be converted to the Group currency, and thus represents a risk in terms of payment.

Translation risk

A translation risk is a currency risk, which may arise as a result of translating profit, cash flow, or balance sheet items to other periods or reporting dates, which are accrued in a currency other than the Group currency. This is therefore a non cash risk.

U

United Nations Global Compact

The United Nations Global Compact is a voluntary strategic initiative for companies designed to promote sustainable development and social commitment. The participating companies acknowledge the ten principles of the Global Compact in the areas of human rights, working standards, environmental protection, and anti-corruption.

V

Value Added

This key figure is based on the assumption that a company creates added value for the investor when the return on the average capital employed exceeds the underlying cost of capital. This excess return is multiplied by the average capital employed (annual average for operating assets and working capital) to give the company’s added value for the year under review.

Value Added = (ROCE - weighted average cost of capital before taxes) ×
(operating assets² + working capital^{2, 4})

W

Working Capital

Working Capital = Inventories + accounts receivable trade + other assets⁵ -
current provisions - accounts payable trade – other payables⁵

¹Adjusted for the effects of market value changes of operating forecast hedges; for adjusted Group earnings,
the related effects on deferred and cash taxes are also eliminated.

²Annual average.

³Adjusted for reimbursement claims and corresponding obligations.

⁴Adjusted by deferred tax influencing goodwill from initial consolidation.

⁵ Without the market value of operating forecast hedges still outstanding as well as derivatives no longer
in operation, but including premiums paid for derivatives used for operating purposes; without receivables
and liabilities from financial investments; adjusted for reimbursement claims as well as the surplus of the CTA plan assets.

Mandatory Publications

Insider Information, Director's Dealings, Voting Rights Announcements ► Mandatory publications of the company