Corporate strategy and strategic direction of the business units
Differentiation and sustainable margin growth through specialisation
The K+S Group aims to consolidate and expand market positions in its strategic business units, in particular through the increased marketing of speciality products. The refinement strategy makes it possible to achieve higher margins in the Potash and Magnesium Products and Salt business units.
Increasing efficiency and exploiting synergies
In respect of the most important competitors in the main sales markets of the Potash and Magnesium Products and Salt business units, the cost position is a key success factor. In addition to consistently pursuing cost-cutting and flexibilisation initiatives throughout the whole process chain, the focus is also on optimising the international customer and production network as well as the associated volume flows and logistics costs. Comparable mining processes make synergies between the Potash and Magnesium Products and Salt business units possible in the exchange of technical, geological and logistics know-how as well as economies of scale in the procurement of machines and auxiliary materials.
Expansion of the balanced regional portfolio
Worldwide, both potash and salt markets are characterised by seasonal and regional fluctuations in demand. The strategy of the K+S Group is aimed at a balanced regional portfolio, which makes a balance of weather-related fluctuations and a cushioning of cyclical market trends possible.
In the Potash and Magnesium Products business unit, the balanced market presence in the important agricultural regions of Europe, South America and Asia makes it possible to even out seasonal differences between the northern and southern hemispheres as well as to reduce the regional demand effect triggered by economic trends. Expanding the market presence in important overseas regions and tapping into new attractive sales territories in future growth regions therefore continue to be pursued.
Local production is a significant factor in the opening up of new markets in the salt business, which is strongly volume-driven. In the Salt business unit, the improvement in the earnings profile as a result of the regional diversification of the de-icing salt business was an important driver of our acquisitions in South and North America (SPL and Morton Salt).
Setting standards for quality, reliability and service
The goal of the K+S Group is to be its customers’ preferred partner in the market. High product quality and reliability are decisive preconditions for this. In addition to the specialisation strategy, better and innovative services are promoted, where these create value. Individual advice to customers makes it possible to identify needs-based solutions and thus to strengthen customer loyalty. With our offers we endeavour to set new standards in the market.
Strategic direction of the business units
With the Potash and Magnesium Products and Salt business units, the K+S Group has two complementary fields of operation, linked by synergies in many parts of the value creation, with attractive growth prospects at its disposal.
In addition to organic growth, we also strive to achieve growth via acquisitions and cooperation in the established business units.
Strategy Potash and Magnesium Products
The future strategic fields of action arising for the Potash and Magnesium Products business unit.
The future strategic fields of action arising for the Salt business unit.
Strategic group structure
As regards the shaping of the Group structure in terms of company law, in addition to the presentation of our business unit structure, the optimisation of Group financing and tax optimisation are the main focuses.
Strategic financing measures
Essentially we pursue the following goals with the financial measures that we have adopted:
- Ensuring a balanced capital structure
- Limiting refinancing risks through diversification of the financing sources and instruments as well as the maturity profile
- Optimisation of costs through capital procurement on sustainably favourable terms
As part of these objectives, in financial year 2010, we initially optimised the maturity profile of the financing instruments of the K+S Group. To that end, two revolving credit lines were aggregated into one syndicated credit line with more favourable terms and their maturity extended from April 2012 to July 2015. In addition, we placed a second corporate bond of € 500 million on 12 June 2012. The bond has a ten-year term and an interest coupon of 3.0% p.a. The cash inflow is to be used to refinance the corporate bond already outstanding and due in 2014 (issue volume: € 750 million; interest coupon 5.0% p.a.). This measure, the other liquidity and future cash flows serve the financing of the Legacy Project in Canada as well as general corporate purposes.
Liquidity is managed by the central treasury department. We thus strive for a constant liquidity reserve for the K+S Group of at least € 500 million. With investments we pursue the goal of optimising the income earned from liquid funds at low risk.