K+S Q4 earnings drop 47%, predicts ‘tangibly’ lower prices in 2014

LONDON (ICIS)–K+S’ fourth-quarter 2013 adjusted group earnings from continued operations fell 47.1% year on year to €69.4m, as declining sales prices for potash and magnesium products weighed on the Germany-based fertilizer producer’s performance, it said on Thursday.

The factors weighing on potash pricing are unlikely to improve this year, the company added.

“Revenues in the Potash and Magnesium Products business unit [in 2014] should be tangibly down on account of the anticipated lower annual average prices,” K+S said.

Operating earnings for the fourth quarter of 2013 were down 45.3% year on year at €99.6m and earnings before interest, taxes, depreciation and amortisation (EBITDA) fell by 30.7% for the period to €168.3m, despite a 3.9% increase in sales to €977.9m.

K+S noted that its potash and magnesium fertilizer products business had been impacted all through the second half of 2013 by the break-up of fertilizer cartel Belarusian Potash Corporation (BPC) in late July, and Uralkali’s subsequent decision to pursue a volume-based strategy.

The statement is a volte-face from the company’s remarks immediately following Uralkali’s breakaway from BPC, when the company issued a statement saying that reports of an impact on prices was “not understandable to us”, and that the positive medium- and long-term trends for potash fertilizers remained unchanged.

“As a result, international prices for potassium chloride in particular came under pressure,” K+S said.

The company noted that potash and magnesium products sales volumes are likely to be stable year on year in 2014, estimating the global potash market at 59m tonnes, but that average prices would be noticeably below 2013 levels. Fourth-quarter operating earnings for the division fell 67.1% year on year to €54.3m.

Operating earnings for the company’s salt division more than doubled for the fourth quarter to €49m, driven by sales of de-icing products, with division performance in 2014 expected to be roughly stable compared to 2013.

The impact of the price slump for potash and magnesium is likely to result in “moderately” lower group revenues for the year compared to 2013.

Adjusted group earnings from continuing operations for the year were down 18.8% compared to 2012 at €437.1m, while sales were stable and EBITDA down 12.2% at €3.95bn and €907.2m, respectively. The company said on 12 March that it has slashed its planned dividend pay-out by 82% to help fund its Canada potash project.

The company is looking to cut costs by €500m by 2016, and €150m of efficiencies are earmarked for 2014, K+S said, with details of the form those measures will take to be announced in future, according to CEO Norbert Steiner.