K+S Group, Kassel, provided an early insight into its new strategy under development following the sale of its Americas operating unit at a company first-quarter earnings call on May 11. The company expects to complete the new strategy process by the late summer.
“We are now a mid-sized company, with a clear focus on agriculture and smaller industry business,” said K+S Chairman Burkhard Lohr.
Following the divestment, the sale of the Americas operating unit, K+S has combined the business of its Communities and Consumers business segments into its Industry+ business segment given the ensuing reduction in the Communities and Consumers segments’ business following the sale (GM April 23, p. 34).
“Our new mission statement is: we enrich life for generations,” Lohr told analysts. “This clearly demonstrates our commitment to making the great sources of nature available in an environmentally responsible way to create value and health for people. Our range of products and services will be developed for generations to come.”
He outlined the five principles that reflect the company’s new approach: ensuring nutrition, health, and safety; enabling the success of its customers; being committed to sustainable mining; leveraging its unique infrastructure for economic efficiency; and acting as a partner with the company’s communities.
Lohr said the company is focusing on four key aspects in developing the new strategy.
Firstly, K+S will make its existing businesses more robust, and by 2023 at the latest, the company is targeting to be capable of generating a positive free cash flow at each of its production sites “even at low potash prices.” It plans to do this not only by focusing on cost efficiencies, but also optimizing the product and regional mix. It said first measures in this respect already will have been implemented by 2022.
The company said while from 2023 its capital expenditure will stabilize again, this year and in 2022, it once again faces high environmental expenditures due to ongoing expansions to its tailing pile capacities in Germany.
K+S expects its overall capex this year to remain at approximately 2020’s level, which totaled €427.6 million. The company expects to see the first decline next year” by about €50 million,” and another step-down in 2023.
Secondly, K+S will continue to further develop its existing businesses, for example, in the fertigation business, and thirdly, it will tap into new business areas.
“We are recognizing our incredible infrastructure as a potential source for new businesses. The REKs (waste management) joint venture is an example, but there will be much more, especially around renewable energies,” Lohr told analysts. “We are the last meaningful active mining company in Germany, and we know what is required for some ideas around energy.”
However, he said it was too premature to elaborate as the company is still working on its new vision and mission.
The fourth aspect relates to K+S’ climate strategy. The company has set itself the target of reducing its CO2 emissions by a further 10 percent by 2030, using its own resources. The company over the past 30 years said it had reduced its CO2 emissions by around 80 percent by 2020.
“Technically, we are able to reduce CO2 emissions to zero, but this requires a competitive price for green energy,” said Lohr.
K+S at the end of 2021 will discontinue the injection of saline wastewater into the plate dolomite. As from the beginning of 2022, the underground storage of saline solutions in the Springen mine field will be used as a new local disposal route.
While the state parliaments of Hesse and Thuringia approved the amendment of the state treaty on the cross-border mining of potash salts at the end of 2020, the company has still to secure the required permits to use the new disposal route which is an important prerequisite for the future disposal concept at K+S’ Werra plant (GM May 7, p. 45).
Boeckers told analysts the company “is very optimistic” about securing the permits “soon,” and that the company will be able to start depositing waste saline water in the mine field from Spring 2022. He pointed out that K+S usually has not needed to use deep well injection in the first three months of the year, so if the company gets permission by May, it will still be fine.
K+S last week announced the public prosecutor’s office in Meiningen, Germany, had closed the investigation against representatives of the company as well as against certain German authorities and ministries relating to alleged irregularities in the past around securing saline wastewater permits. Lohr dismissed some media reports that legal proceedings could restart; “The investigation is closed,” he told analysts.