14 May 2014

Business development in the first quarter

Upward trend evident in the potash business

  • Robust demand in the Potash and Magnesium Products business unit
  • Price level for potash fertilizers has bottomed out
  • De-icing salt sales volume up significantly on previous year
  • At € 1,189 million, revenues of the K+S Group down moderately on previous year
  • Operating earnings EBIT I at € 220 million (Q1/2013: € 278 million)
  • “Fit for the Future” delivering first successes 
  • 2014 outlook unchanged: Significant decrease in EBIT I due to lower potash average prices year on year

The revenues and earnings posted by the K+S Group for the first quarter of 2014 were down compared to the strong results for the same period a year ago. However, following the turmoil on the global potash market in the second half of 2013, there are signs which point to an upward trend once again. “The demand for potash and magnesium products is robust and we see indications that the price level has bottomed out,” says Norbert Steiner, chairman of the Board of Executive Directors of K+S Aktiengesellschaft.

Revenues of the K+S Group were down by about 7 % to € 1,189.0 million in the first quarter of 2014 compared with the corresponding period a year ago, operating earnings EBIT I reached € 219.6 million and were 21 % below the figure reported a year ago (Q1/13: € 277.9 million).

The market for products containing potash has displayed a significant tendency towards stabilization over the past few months. North American and Russian producers were able to conclude contracts with Chinese and Indian customers; further suppliers followed. Against this backdrop, demand stabilised and international prices for potassium chloride rose. In our main sales regions of Europe and Brazil, demand was high in the first quarter. Because prices only gradually recovered from the development in the second half of 2013 and the sales volume was slightly lower than in the previous year, revenues in the Potash and Magnesium Products business unit were almost 19 % below the figure for the previous year, while earnings decreased by about 36 %.

The Salt business unit increased revenues by 4.3 % and earnings by 21.9 % mainly as a result of volume factors. The main reason for this was a significant increase in demand in the United States and in Canada due to distinct and persistent wintry weather. In Europe, however, the exceptionally mild winter led to a decline in demand. “All in all, the positive effect of our internationalisation can be seen very vividly in the Salt business unit”, said Steiner.

Adjusted Group earnings of the K+S Group after taxes for the period under review came to € 141.5 million (Q1/13: € 190.2 million). This corresponds to a decrease of just under 26 %. Adjusted earnings per share for the same period reached € 0.74 after having been € 0.99 in the same period last year ((25.6) %).

First successes for “Fit for the Future”

The programme to improve cost and organisational structures initiated in November 2013 already attained its first successes in the first quarter of 2014. In the case of material costs and maintenance in particular, the desired cost savings could be achieved. With “Fit for the Future”, K+S is striving to save a total of € 500 million by 2016 in comparison with the previous cost planning for the same period. In 2014, a cost reduction of a good € 150 million compared with previous planning is to be achieved. A sustainable cost reduction is to be achieved primarily in the case of material costs – without cuts in occupational safety and environmental matters. In addition, achieving the savings targets set in all probability also requires an adjustment of personnel structures and personnel costs. Against this background, the Board of Executive Directors, the Collective Works Council and the Mining, Chemicals and Energy Trade Union (IG BCE), with effect from 1 April 2014, jointly defined framework conditions which take effect when specifying measures and ensure an socially acceptable package for those employees concerned. If, when and to what extent personnel measures become necessary is an open issue at the moment.

Capital expenditure in first quarter rises steeply as planned

In the first quarter of 2014, the capital expenditure incurred by the K+S Group came to € 164.6 million and was therefore about 50 % higher than in the same quarter of the previous year (Q1/13: € 110.8 million). The majority of the capital expenditure was accounted for by the Potash and Magnesium Products business unit. Apart from the implementation of the package of measures for water protection in the Hesse-Thuringia potash district, the new construction of a potash plant in Canada largely accounted for capital expenditure here. Steiner: “The work on the Legacy Project is continuing to make good progress.” The first quarter saw the completion of a first test cavern for the extraction of brine containing potash at a depth of approximately 1,500 metres. In the meantime, more contracts were also signed with important partners, for example with the port operator Pacific Coast Terminals for the construction and operation of a new handling and storage facility in the port of Vancouver for the Legacy plant’s products. The commissioning of Legacy is still planned for the summer of 2016.

Outlook 2014 unchanged

The revenues of the K+S Group for financial year 2014 should be moderately below the figure of the previous year (2013: € 3,950 million). Tangibly lower average prices year on year, in particular, should result in lower revenues for the Potash and Magnesium Products business unit. The trend towards price increases that is discernible in this regard, as well as solid salt sales volumes, will not be able to make up for this effect.

Due to the revenue decrease in the Potash and Magnesium Products business unit, operating earnings EBIT I of the K+S Group should be significantly lower than a year ago (2013: € 655.9 million).

Adjusted Group earnings after taxes should follow the trend in operating earnings and thus also be significantly lower than in the previous year (2013: € 434.8 million).

Future capital expenditure increases as planned because of Legacy

The K+S Group’s anticipated volume of capital expenditure for 2014 amounts to just under € 1.2 billion (2013: € 742.5 million). Outlays connected with the Legacy Project should account for about € 800 million of this figure. Part of the capital expenditure is also intended for the implementation of the package of measures on water protection in the Hesse-Thuringia potash district. 

Further details concerning the outlook can be found on page 20 of the Q1/2014 Quarterly Financial Report.

About K+S

K+S is an international commodities company. We have been mining and processing mineral raw materials for 125 years. The products we produce from them are used worldwide in agriculture, food and road safety and are important elements in numerous industrial processes. The nutrients potash and salt are accompanying the megatrend for the future: A constantly growing global population is becoming increasingly prosperous and striving for a more modern standard of living, which results in an increasing consumption of mineral raw materials. We serve the resulting growth in demand from production sites in Europe, North America and South America as well as through a global distribution network. K+S is the world’s largest salt producer and one of the top potash providers worldwide. With more than 14,000 employees, K+S achieved revenues in financial year 2013 of about € 4 billion and an EBIT of € 656 million. K+S is the commodities stock on the German DAX index. Learn more about K+S at www.k-plus-s.com.

Note to editors:

The Quarterly Financial Report and the Q1/14 Facts & Figures are available at www.k-plus-s.com/2014q1en on our website.

Today’s Annual General Meeting of K+S Aktiengesellschaft will be transmitted live on the Internet at www.k-plus-s.com/agm starting from 10 a.m. until the end of the speech given by Norbert Steiner, the chairman of the Board of Executive Directors. In addition, the speech will be available there starting from 10 a.m., and at about 2 p.m., a video with extracts from the speech by the chairman of the Board of Executive Directors will be offered to view or for download. Current pictorial material concerning the K+S Group and photos of today’s Annual General Meeting will also be available on the Internet at www.k-plus-s.com/agm starting from about 12 noon.

A conference call with Dr. Burkhard Lohr, chief financial officer of K+S Aktiengesellschaft, in English will take place on 15 May 2014 at 3 p.m. Investors, analysts and representatives of the press, as well as all other interested parties are invited to follow the conference via a live webcast at www.k-plus-s.com/2014q1en or by phone on +49-69-71044-5598. The conference is being recorded and will also be available as a podcast.

Michael Wudonig

Spokesman

Phone: +49 561 9301 1262
michael.wudonig@k-plus-s.com

Michael Wudonig
Spokesman

Bertha-von-Suttner Str. 7
34131 Kassel
Germany

Phone: +49 561 9301 1262
Fax: +49 561 9301 1666
michael.wudonig@k-plus-s.com

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Thorsten Boeckers

Board of Executive Directors

Thorsten Boeckers
Board of Executive Directors

Bertha-von-Suttner Str. 7
34131 Kassel
Germany

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