Europe cold snap unlikely to boost K+S salt earnings - analyst

31 January 2013 10:46  [Source: ICIS news]

LONDON (ICIS)--The recent icy weather that spread across much of Europe is unlikely to cause a rally in first-quarter 2013 salt volumes for Germany-based salt and fertilizer specialist K+S, financial analyst Bernstein Research said on Thursday.

According to the US-based firm, which currently rates K+S as an ‘Underperform’, January has not been cold enough to aid a salt volume recovery.

“Temps are currently in line with median levels... [and] inventories remain high,” said Bernstein in an investor note.

The firm also predicted that K+S would miss its 2012 estimates of €2.75 ($3.72) earnings per share, due to a warmer-than-usual fourth quarter and lower potash prices, and that K+s is likely to reduce its performance forecast for 2013 when it releases its full-year report on 14 March.

Bernstein is holding its target share price for K+S at €27, substantially below the €33.79 per share the company’s stock was trading at as of 09:58 GMT on Thursday.

Bernstein said: “We continue to rate K+S Underperform for three reasons. First, surplus capacity and sluggish demand growth will cause flat to down potash prices in the short-term and large capacity additions will pressure prices in the long-term.

“Second, due to the weak European economy, K+S must shift to exports at lower profitability and higher costs in general. Third, we expect nearly flat potash production until the Legacy project ramps up through 2016,” the analyst added.

($1 = €0.74)

By: Tom Brown
+44 208 652 3214

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