| 2012/02/08 | 17:35:01 | + 15 min |
| Price: 40.15 EUR | -1.10 % |
Potash and Magnesium Products Business Segment
Market environment
Demand for potash fertilizers, in particular from the trade sector, considerably picked up again in the first quarter of 2010, as efforts were made to rebuild inventories in preparation for the spring season in the northern hemisphere. In Brazil and Asia too, demand normalised visibly. The contracts concluded by some potash suppliers with Chinese and Indian customers at the end of last year and the beginning of this one, at US$/t 350 and US$/t 380 respectively for potassium chloride standard, including freight, supported confidence in the stability of prices that therefore supported the revival in demand. Against this backdrop, a stable price level of up to US$/t 385 for potassium chloride standard and US$/t 400 for granulated potassium chloride, both including freight, was also established on the other overseas markets. At the start of 2010, K+S announced the new price for Europe for granulated potassium chloride of €/t 285 including freight, and simultaneously announced an increase of €/t 12 from March 2010. The majority of potash producers were back at almost fully utilising their production capacities again. However, primarily in the northern hemisphere, logistical problems, partly due to wintry weather conditions, restricted the flow of goods to some extent.
Revenues by product group Jan. – March 2010
in %; previous year’s figures in italics
Revenues
In the first quarter, the significant revival in demand for potash also resulted in our production capacities being almost fully utilised. As a consequence, revenues of the business segment rose by € 132.4 million or 36 % to € 498.4 million. In the areas of potassium chloride and fertilizer specialities, the sharp increase in volumes was able to far more than make up for negative and structural effects. Against this backdrop, potassium chloride achieved a revenue growth of 73 % to € 236.7 million, and revenues for fertilizer specialities increased by € 52.1 million to € 197.6 million (+36 %).
In the area of industrial products, revenues declined by 23 % to € 64.1 million (Q1/09: € 83.7 million) after the expiry of longer-term contracts, primarily due to price factors. First quarter sales volumes totalled 1.94 million tonnes, more than double the figure for the same period in the previous year (Q1/09: 0.90 million tonnes). A detailed overview of revenues, sales volumes and prices by quarter and region can be found in the Notes on page 33.
Revenues by Region Jan. – March 2010
in %; previous year’s figures in italics
Development of earnings
Operating earnings amounted to € 150.6 million and were thus € 53.6 million or 55 % up on the same period last year. The significantly higher revenues were able to more than make up for the volume-related higher total costs, which rose to a lesser extent, however, as a result of fixed cost degression.
At € 171.5 million (Q1/09: € 117.1 million), EBITDA reflected this earnings trend, due to an almost constant depreciation and amortisation level.
Outlook
In the first quarter, demand for potash and magnesium products was mainly supported by the need of the trade sector to again increase their low inventories in preparation for the spring season in Europe. It has become clear in the meantime that the volumes demanded by the trade sector were also used by farmers. Against this backdrop, we have adjusted our previous sales volume forecast of just under 6 to a good 6.5 million tonnes of product (2009: 4.3 million tonnes). On this basis, and in light of our existing production capacity of just under 8 million tonnes of potash and magnesium products, a fractional production cutback in the second half of the year is likely. Assuming current potash prices, a significantly lower average price level than in the previous year is however expected. Against this background, 2010 revenues of the Potash and Magnesium Products business segment should increase tangibly in comparison to a year ago. Despite the expected higher production output, the total costs will probably rise to a less than full extent, due to the high proportion of fixed costs and the cost-reduction measures already launched last year. The operating earnings of the business segment should therefore significantly exceed the previous year’s result.
