LONDON (ICIS)--German fertilizer producer K+S’ muriate of potash (MOP) division hit revenues of €163.3m ($191.9m) in the second quarter of 2017, up from €155.3m in Q2 2016, according to the company's latest financial report.
Kassel-headquartered K+S attributed the heightened revenues to increased demand from agriculture, especially in Europe, and reported MOP and magnesium product sales in excess of 1.54m tonnes in Q2 2017, up year on year from 1.48m tonnes, but down from the first quarter this year, when sales topped 1.82m tonnes.
More than 52% of the company’s overall second-quarter adjusted earnings after tax of €18.9m was generated by its MOP and magnesium projects division.
“The larger production volumes at the integrated Werra [Germany] plant compared with the same quarter of the previous year increased product availability, lifting overall sales volumes,” the company stated in the H2 earnings report.
K+S’ Werra plant near the town of Gerstungen in Germany’s Thuringia state has been a source of controversy this year, thanks to a long-running legal dispute over the disposal of wastewaters from the company's potash operations.
The town has been seeking legal action to prevent K+S from injecting the wastewaters underground, arguing that the injections jeopardise its drinking water supplies. Both company and town council are expecting to resolve the dispute in Q3.
The company relies on discharges into the Werra river, as well as underground injections, to dispose of the wastewaters. If it cannot dispose of the wastewaters it has to suspend potash production in the region, where it employs more than 4,000 people.
K+S reported no wastewater disposal-related interruptions at the Werra plant in Q2, having implemented additional measures for temporary wastewater disposal, including discharging into its inactive Bergmannssegen-Hugo mine, and transporting the run-off to Bernberg in Saxony-Anhalt, where the waters are being used to shut down and secure a gas cavern.
However, despite these measures, the company admits it’s likely not seen the last of wastewater-related disruption at Werra: “We will again be affected in 2017 by production suspensions at individual Werra plant sites during dryer months. In the first half of the year, the suspensions lasted for 25 working days, which impacted results for the first quarter.
“Notwithstanding all the improvements in the possibilities for disposing of production wastewater that have already been achieved, there is no guarantee that further suspensions will not become necessary later on in the year.”
Meanwhile, the company’s Bethune MOP mine in the province of Saskatchewan, Canada, which was formerly known as the ‘Legacy Project’, is expected to hit its annual capacity target of 2m tonnes by the end of the year. K+S anticipates achieving capacity of 2.86m tonnes at Bethune in the long term, and expects average production costs to fall in concert with the capacity increase.
The mine produced its first tonnes in July, and K+S says: “The new potash plant will… make the company much more competitive at an international level, which will benefit the results of operations of the entire K+S Group.”
This bullish stance suits K+S’ outlook for the fertilizers industry in months ahead, with the report stating: “the contracts signed by the major potash suppliers with Chinese and Indian customers halfway through the year should stimulate global demand in the second half of the year, particularly in Southeast Asia”.
For the whole of 2017, K+S expects an operating profit of between €260m and €360m, with sales volumes at 6.8m-7.2m tonnes
Additional reporting by Pearl Bantillo and Stefan
Focus article by Andy Hemphill
(€1 = $1.18)
Pictured: Potash evaporation ponds in the desert near Moab, Utah, America - May 2015 (Jassen Todorov/Solent News/REX/Shutterstock)