13 November 2014

Business development in the first nine months of 2014

Revenues and earnings down on previous year’s level

  • Average prices for potash and magnesium products still lower than in previous year
  • Positive price effects in North American salt business 
  • Revenues: 9 months € 2,802 million (-6%) / Q3 € 827 million (+1%)
  • EBIT I: 9 months € 511 million (-8%) / Q3 € 134 million (+16%)
  • Further progress with ‘Fit for the Future’ programme
  • Improved outlook for 2014 following positive development of prices in the third quarter: Expected EBIT I of between € 580 and 640 million including special item (2013: € 656 million)

Revenues and earnings for the K+S Group in the first nine months were below the respective values in the previous year. In spite of the continued recovery of potash prices during the reporting year and robust demand, the average price for potash and magnesium products was still below the comparative figure in 2013.

“A look at the development over the first nine months shows that we are still feeling the effects of the sharp fall in the price of potash in the second half of 2013,” said Norbert Steiner, Chairman of the Executive Board of K+S Aktiengesellschaft. “A slight upwards trend is now evident from the increase in operating earnings in the third quarter. Again pleasing was also the earnings development of our Salt business unit. We are continuing to make good progress with ‘Fit for the Future’ and our Legacy project.”

K+S Group revenues fell by just under 6% to € 2,802 million in the first nine months. Higher sales volumes in the Salt business unit resulting from the severe winter in North America at the beginning of 2014 only partially offset the fall in price in the Potash and Magnesium Products business unit. Revenues reached € 827 million in the third quarter. This figure was a good € 9 million higher than in the comparable period in the previous year due mainly to higher volumes in the salt business.

Operating earnings (EBIT I) of € 511 million after nine months

K+S Group operating earnings (EBIT I) fell by just under 8% to € 511 million in the first nine months. EBIT I in the Potash and Magnesium Products business unit fell by just under 19% to € 404 million. This decrease compared with the previous year was mainly the result of the lower price level for potassium chloride and slightly declining sales volumes. In the Salt business unit on the other hand, EBIT I rose to € 116 million compared with € 69 million in the previous year as a result of higher volume-related revenues in North America and savings associated with the ‘Fit for the Future’ programme which had a positive influence on the result in both business units.

The K+S Group generated operating earnings (EBIT I) of € 134 million in the third quarter (Q3/13: € 116 million). This represents an increase of 16% compared with the previous year. The recovery in average prices in the Potash and Magnesium Products business unit also continued in the third quarter. However, these prices were still slightly below the figures for the same period in the previous year. EBIT I for the Salt business unit improved compared with the previous year thanks to early fills in North America. The K+S Group EBIT I includes a special item of € 6 million relating to an insurance gain following the business interruption at the Unterbreizbach site. A portion of the claim (€ 30 million) was already taken into account in the second quarter. The total compensation claim amounted to € 36 million.

‘Fit for the Future’ programme delivers expected results

This programme to improve cost and organisational structures, which was launched in November 2013, aims to increase the efficiency of production and that of administration and sales functions. K+S is targeting total savings of € 500 million by the end of 2016 compared with the previous cost planning for this period. Up to 70% of the € 150 million savings target for 2014 has already been achieved. Cost reductions were achieved particularly in terms of material and energy costs, but also structurally in the area of logistics.

Capital Expenditure increased strongly as planned - Legacy making good progress

The K+S Group made total investments of € 731 million in the first nine months of 2014 (9M/13: € 489 million). Investments amounted to € 295 million in the third quarter, roughly equivalent to a 60% increase on the same period in the previous year (Q3/13: € 186 million). The bulk was in the Potash and Magnesium Products business unit and related mainly to the construction of a new potash mine in Canada (Legacy Project). Work there continues to progress as planned. K+S is still anticipating commissioning in summer 2016. A further sizeable share of investment related to the implementation of the package of measures for water protection in the Hesse-Thuringia potash district.

Outlook raised for 2014

The K+S Group is now expecting revenues of between € 3.7 and 3.9 billion for 2014 (previous forecast: € 3.65 to 3.85 billion; 2013: € 3.95 billion). Operating earnings (EBIT I) should be between € 580 and 640 million (previous forecast: € 490 to 570 million; 2013: € 656 million). These include a special item relating to an insurance gain of € 36 million following the business interruption at the Unterbreizbach site. The main reason for raising the outlook is the expectation that average prices in the Potash and Magnesium Products business unit will now be slightly better than previously assumed. However, prices are still expected to remain moderately below 2013.

About K+S

K+S is an international resources 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 (Q3/2014), a video webcast by Dr. Burkhard Lohr, the Chief Financial Officer of K+S Aktiengesellschaft, and up-to-date press photos around the K+S Group are available at www.k-plus-s.com/2014q3en.

We are offering a conference call for analysts in English today at 2 p.m. Dr. Burkhard Lohr, member of the Board of Executive Directors, will participate in the conference call. Investors, representatives of the press and all other interested parties are invited to follow the conference via a live webcast (www.k-plus-s.com/2014q3en) or by phone on +49-69-71044-5598. The conference is being recorded and will then 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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