May 9, 2007

K+S Group

A good start in Q1/2007 despite mild winter in Europe

The K+S Group had a good start into 2007 despite the mild winter in Europe and the related negative effects on the de-icing salt business. The first quarter was influenced worldwide by strong demand for potash fertilizers, which was also bolstered by rising prices for agricultural products. The international price level for potash increased further, so that the market began 2007 with higher prices than at the beginning of 2006. The early start of the fertilizing season caused by weather conditions also impacted favourably on the COMPO and fertiva business.

Commenting on this at today’s Annual General Meeting, Dr. Ralf Bethke, Chairman of the Board of Executive Directors of K+S Aktiengesellschaft, said: “Rising prices are encouraging farmers worldwide to increase their use of the land available to them and their land intensity. Both these elements require greater use of fertilizers. K+S will profit exceptionally from this with its broad and needs-oriented product range.”

First quarter revenues rise by 10%

At € 944.7 million, first quarter revenues were up € 89.2 million or 10% on the same period last year; in addition to the first-time consolidation of SPL, this was essentially attributable to higher prices in the fertilizer business. This more than made up for negative volume and currency effects. Pleasing revenue increases were achieved by the Potash and Magnesium Products business segment as a result of increased volume and higher prices compared with a year ago. The COMPO and fertiva business segments also achieved significant revenue increases. The rise in revenues for the Salt business segment resulted from the first-time consolidation of SPL, which more than made up for the negative effect stemming from the unusually low sales of de-icing salt prompted by weather conditions in Europe.

At € 103.3 million, operating earnings (EBIT I) for the first quarter of 2007 were down € 9.8 million on the same period last year. Tangible earnings increases in the Potash and Magnesium Products and COMPO business segments could not yet fully make up for the significantly lower earnings contribution of the Salt business segment resulting from the weak de-icing salt business in Europe. However, this already reflected the positive earnings momentum of the Potash and Magnesium Products business segment.

After adjustment for the effect of market value changes,  adjusted Group earnings after taxes amounted to € 62.6 million in the first quarter and were down € 8.6 million (-12%) on the same period last year. This corresponds to adjusted earnings per share of € 1.52 (Q1/2006: € 1.73 per share).

Outlook for 2007 raised significantly

On agricultural markets, the tendency for food production to be insufficient is resulting in a further decline in stocks of agricultural products. The resulting price increases that can be observed are having a favourable effect on the use of mineral fertilizers. In addition, the trend towards renewable raw materials is also impacting positively on fertilizer demand. International price levels have risen significantly as a result of the related strong demand for potash fertilizers while producer stocks remain low at the same time.

The salt business, particularly in the fourth quarter, will largely depend on winter weather conditions. In this respect, K+S assumes average sales figures for a good many years for both the European and North American markets which, however, will not make up for the current shortfall in sales of de-icing salt.

Given the conditions that are expected, K+S anticipates a tangible rise in revenues this year, which will also be positively influenced by consolidation effects arising from the first-time inclusion of SPL for the entire year. The K+S Group’s operating earnings over the coming three quarters should not only offset the current shortfall but also more than make up for it to an appreciable extent. 

Our outlook is based on the following premises: strong global demand for potash fertilizers, a significant reserve in the double-digit millions range for possible follow-up hedging because of the continued depreciation of the US dollar, energy costs on their current level as well as average de-icing salt business in Europe and North America in the fourth quarter.

Experience Growth

The K+S Group is one of the world's leading suppliers of speciality and standard fertilizers, plant care and salt products. Achieving healthy and sustained growth is its goal as a company and a general challenge at the same time. K+S offers agriculture, industry and private consumers a range of goods that meet needs and serve as the basis for growth in almost all areas of day-to-day life in the form of tailor-made and branded products. The K+S Group employs about 12,000 people. The K+S share is listed on all German stock exchanges (ISIN: DE0007162000, Symbol: SDF) and included in the MDAX share index.   

Conference Call for Analysts

In connection with the publication of the figures for the first quarter of 2007, Dr. Ralf Bethke, Chairman of the Board of Executive Directors of K+S Aktiengesellschaft, and Mr. Norbert Steiner, Vice Chairman of the Board of Executive Directors of K+S Aktiengesellschaft, will answer analysts’ questions in a conference call on 10 May 2007. You can follow the conference as of 3 p.m. at www.k-plus-s.com.