| 2012/05/22 | 17:12:28 | + 15 min |
| Price: 34.45 EUR | -0.13 % |
Potash and Magnesium Products Business Segment
Market environment
In the second quarter of 2010, the normalisation of demand for potash fertilizers continued. The potash fertilizers ordered in the first quarter by the trade sector in the northern hemisphere were used by farmers for spring application at almost a normal level again. In Brazil and Asia too, demand recovered visibly. Following the conclusion of contracts 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 370 respectively for potassium chloride standard including freight, a global price level of between US$/t 350 and US$/t 400 was established for potassium chloride including freight. At the start of 2010, K+S announced a new price for Europe for granulated potassium chloride of €/t 285 including freight, and simultaneously announced an increase of €/t 12 from March 2010. In mid-June, prices were increased moderately by €/t 8 to €/t 305. For most potash producers, capacity utilisation did not achieve the very high level of the first quarter, but was nonetheless pleasing.
Revenues by product group Jan. – June 2010
in %; previous year’s figures in italics
Revenues
The significant revival in demand for potash since the start of the year also resulted in our production capacities being well utilised in the second quarter. The revenues of the business segment consequently increased due to volume and currency factors by € 109.2 million or 31 % to € 463.5 million. In the sector of potassium chloride and fertilizer specialities, the strong increase in sales volumes was able to significantly more than make up for negative price and structural effects. Against this backdrop, the potassium chloride sector achieved revenue growth of 36 % to € 233.3 million, and revenues with fertilizer specialities even increased by € 54.2 million to € 160.5 million (+ 50 %). In the sector of industrial products, mainly due to price factors, revenues declined by 8 % to € 69.2 million (Q2/09: € 75.0 million). Sales volumes of potash and magnesium products in the second quarter increased by 65 % and amounted to 1.73 million tonnes (Q2/09: 1.05 million tonnes). Half-year revenues grew by a total of 34 % to € 961.9 million, and sales volumes in the first half of the year totalled 3.67 million tonnes. A detailed overview of revenues, sales volumes and prices by quarter and region can be found in the Notes on page 37.
Revenues by Region Jan. – June 2010
in %; previous year’s figures in italics
Development of earnings
Operating earnings in the second quarter amounted to € 119.2 million and thus more than doubled (Q2/09: € 53.8 million). 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. The US dollar, which had further strengthened significantly in the second quarter, also had a positive effect on earnings. In the first six months, a contribution to operating earnings of € 269.8 million was achieved (H1/09: € 150.8 million).
At € 139.9 million (Q2/09: € 74.2 million), EBITDA reflected this earnings trend, due to an almost constant depreciation and amortisation level. In the first six months, EBITDA was € 311.4 million (H1/09: € 191.3 million).
Outlook
In the second quarter, the potash fertilizers demanded by the trade sector in the northern hemisphere was again used by farmers within the framework of spring application at almost a normal level, so that stocks were again at a relatively low level before the upcoming autumn application. Moreover, the demand for potash fertilizers should benefit from the persistent dry weather conditions at the start of the third quarter, the higher prices for agricultural raw materials in view of this and thus the resultant improved future income situation of farmers. Against this backdrop, we have again increased our previous sales volumes forecast from a good 6.5 million tonnes of goods to between 6.5 and 7.0 million tonnes (2009: 4.3 million tonnes). Assuming moderately declining average prices compared with the first half of the year due to expected seasonal product mix and staggered price effects with an otherwise stable potash price level in the second half of the year, revenues should increase significantly in 2010 compared with the previous year. Despite the expected higher production output, the total costs will probably rise to a less than full extent, as a result of the fixed cost degression and the cost reduction measures already launched last year. The operating earnings of the business segment should therefore again significantly exceed the previous year’s result.
