Germany's K+S Q2 net income up 4.3% on strong demand

14 August 2014 09:59 Source:ICIS News

(Adds information on divisions, outlook from paragraph 7)

Kali und SalzLONDON (ICIS)--K+S’ net income rose by 4.3% year on year to €106.4m in the second quarter of 2014, buoyed by good demand for its potash and magnesium products, the Germany-based fertilizer producer said on Thursday.

But the company’s June-quarter revenues fell by 10.2% year on year to €787.7m, with operating earnings down by 3.3% at €157.3m, the company said in a statement.

“The further stabilisation of potash prices on a low level and a positive special item of about €30m characterised the business development of the K+S Group from April to June 2014,” it said.

For the first half of this year, the company’s net income fell by 20.4% year on year to €230.5m, while revenues were down by 8.4% at €1.97bn.

“For financial year 2014, the revenues of the K+S Group should amount to between €3.65bn and €3.85bn (2013: €3.95bn),” it said.

K+S expects operating earnings of between €490m and €570m in 2014, compared with last year's €655.9m.

By divisions, the company said during the first half of 2014 Potash and Magnesium Products had managed to achieve sales of €968.5m.

“[This result is] down significantly on the figure for the same period a year ago as a result of the lower price level and unfavourable exchange rate effects in the overseas business,” said the company.

In terms of volumes, this division sold 3.66m tonnes during the period, a decrease of 4% compared with the first half of 2013. The first six months of this year were also affected by the suspension of operations at K+S’ Unterbreizbach site, following an accident in October 2013.

The Salt business unit registered sales during the January-June period of €928m, up 3.2% compared to the same period a year earlier.

The company added its programme ‘Fit for the Future’ to cut costs “is working” as half of the €150m savings aimed for 2014 have already been achieved.

“The aim of the programme initiated in November 2013 is to increase the efficiency of production as well as of the administrative and sales functions. K+S is striving to save a total of some €500m from 2014 until 2016 in comparison with the previous cost planning for the same period,” said K+S in a statement.

Looking ahead, the company highlighted how its Legacy greenfield project in the Canadian province of Saskatchewan, kept progressing in the second quarter. The project, which is to see investment of €800m in 2014, reached an agreement with Pacific Coast Terminals for the construction and operation of a new cargo terminal and storage facility in the port of Vancouver.

“This will make it possible to transport our potash products from the Legacy site to customers all over the world. In addition, a camp was opened at the future plant site to provide food and accommodation to the more than 1,400 workers deployed there to develop the cavern field and to build production facilities,” said the company.

The potash plant is scheduled to start up in the summer of 2016, said K+S, when total capital expenditure will have totalled  K+S continues to expect the new potash plant to become operational in the summer of 2016, with the total capital expenditure totalling Canadian dollars (C$) 4.1bn (€2.8bn).

Also on its outlook for the year 2014, K+S blamed the low prices for potash as the cause of likely lower revenues for the Potash and Magnesium business unit, although it trusted “solid sales volumes in the Salt business unit” will be able to offset that negative effect.

“Giving the starting position on global potash markets, we had a solid first half of the year. The good salt business in North America and the positive development of our fertilizer specialties were particularly pleasing,” said Norbert Steiner, chairman of the K+S’ board.

(€1 = C$1.46)

Additional information by Nurluqman Suratman

By Jonathan Lopez