LONDON (ICIS)–K+S is to merge its muriate of potash (MOP), salts, and magnesium units in a company-wide strategic overhaul, as the German fertilizer producer sets out to achieve annual operational savings of €150m ($176m) by 2030.
K+S’ new “Shaping 2030” strategy will “reposition a manufacturing-driven company as a market-focused, customer-focused enterprise”, which places an emphasis on “realising synergies”.
The company was quick to renew its commitment to raw materials, however, referring to recent news of first deliveries from its new Bethune MOP mine in Saskatchewan, Canada, as “an important milestone”.
Burkhard Lohr, Chairman of the K+S Board of Executive Directors, says: “It was the right time to develop a clear picture of how K+S is to be structured in 2030.
“To this end, we examined all growth options with a no-holds-barred mind-set. Geared for the long-term, “Shaping 2030” offers maximum value creation potential paired with great robustness.”
The strategy will be executed in two phases, according to K+S. Firstly, through 2020, the company will align its four market segments: agriculture, industry, consumers, and communities, which will “help K+S better address and connect with customers”.
The company says its portfolio will then be broadened – with a focus on high-margin products.
It described the integration of its MOP, magnesium products, and salt units as a “key prerequisite for reinforcing customer orientation”.
K+S expects a positive effect on its earnings to the tune of at least €150m annually by the end of 2020, which will return the company to being free cash flow positive by 2019.
The move will also cut K+S’ net debt in half by 2020, according to the press release.
The second phase of “Shaping 2030” will see K+S “increase operating earnings and reduce the business’ dependence on external factors, such as weather and the global market price for MOP”.
MOP prices have been slow to recover globally, amid persistent oversupply.
The producer will also expand its specialty businesses, such as fertigation – the combined application of water and nutrients to a crop; a process similar to a mix of fertilizer application, and accurate irrigation.
K+S also intends to step-up its business in high-growth regions such as Asia and Africa.
Almost as an afterthought to its announcement, K+S also set itself the goal of achieving €3bn in earnings before interest, tax, depreciation and amortisation (EBITDA) by 2030 – with at least 15% return on capital employed.
“K+S will achieve about two thirds of the growth towards this goal by driving the development of its existing business and optimizing its organization and processes,” the company says.
Lohr adds: “[As] a first step, this means tapping at least €150m in synergies, halving the leverage, and laying a solid foundation for future growth. One of our strategy’s strengths is that none of the growth options is so dominant that ´Shaping 2030`’s success depends on it.”