Germany’ K+S Q1 net income up 32% to €164m on price recovery

LONDON (ICIS)–K+S posted a first-quarter net income at €164m, up 32% year on year, on the back of a price recovery in the potash and magnesium markets, with sales up 16% to €1.38bn, the German fertilizer firm said on Tuesday.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) stood in the first quarter at €383m, up 37% compared to the same three-month period of 2014, while adjusted earnings per share (EPS) from continued operations also rose significantly to €1.04, up 40% compared to the first quarter of 2014.

Operating earnings, or earnings before interest and taxes (EBIT), rose in the first quarter by 44% to €317m.

Higher prices for de-icing salt in North America and positive currency effects of a lower euro value versus the dollar and other major currencies all helped K+S enjoy “significantly” higher revenues than a year earlier, and a “successful start to the year which underlines our confidence” regarding the rest of 2015, said company chairman Norbert Steiner.

“This strong improvement in results is primarily due to price increases in de-icing salt in North America. This more than compensated for the lower sales volumes. The Salt business unit increased EBIT I in this period by almost 60% compared with the previous year. In the Potash and Magnesium Products business unit as well, the recovery in average prices helped to generate higher operating earnings (+36%),” said K+S in a statement.

Steiner added that the group’s costs saving programme had provided an “extremely significant contribution” to the positive results in the first quarter. K+S said the programme had saved it in 2014 “a good €120m” and expected a higher figure for 2015. The German fertilizer forecasts savings of €500m between 2014 and 2016.

The company said it had spent during the first three months of the year €200m in capital expenditure (capex), mostly in its upcoming Legacy Project in Canada, for which engineering plans were completed during the quarter. For the full year, it expects to spend €1.3bn in capex as the final phase at the Canadian mine is finalised.

The Legacy Project, a new potash mine in the southern Canadian province of Saskatchewan, is expected to be in production by late 2016 and reach full capacity of 2m tonnes per year by the end of 2017.

“The focus [during the first quarter] was also on procuring main components in the areas of evaporation, crystallisation, drying and compacting and the construction of the steel structure of the factory,” it said.

“K+S is well on the way to commissioning the plant as scheduled from summer 2016 onwards and producing the first tonnes of potash fertilizers towards the end of the year thus meeting the investment budget of C$4.1bn.”

For the full year 2015, K+S expects sales to be “significantly higher than the figure for the previous year (€3.82bn)” while previously it had forecast sales would be only “moderately” higher, with both business units benefitting from higher prices.

“In particular the Potash and Magnesium Products business unit should also benefit from advantageous currency effects. The Salt business unit should benefit from the higher prices for de-icing salt and early fills,” said K+S.

(updates with further financial information throughout)