K+S Group 2Q earnings drop 119 percent, sees more of the same for second half

Germany’s K+S Group reported a 119 percent drop in group net earnings to post a loss of E44.3 million ($63.2 million; E.27 per share: $.385 per share) on sales of E738.7 million ($1.05 billion) for the second quarter ending June 30, compared to the year-ago net profit of E231.1 million ($330 million; E1.40 per share: $2.00 per share) and E1.18 billion ($1.69 billion). Operating earnings were still in the plus column at E18.1 million ($25.8 million), but were down 94.5 percent from the record amounts of E326.4 million ($465.9 million) posted in the year-ago period.

The company said demand for potash remains exceptionally weak. “Agriculture is continuing to display restraint with respect to the purchase and use of fertilizers, especially in Europe,” said Norbert Steiner, K+S chairman. “Even if there is no sign yet of normalization of demand, fundamental trends, for example, the rising global population, changes in dietary patterns in emerging market countries, as well as the increasing importance of renewable raw materials, remain intact. These facts remain in favor of fertilizer consumption to rise again over the medium to long term.”

Six-month group earnings were down 80.1 percent, to E78.2 million ($111.6 million; E.47 per share: $.67 per share) on sales of E1.81 billion ($2.59 billion), versus the year-ago E393.7 million ($562 million; E2.39 per share: $3.41 per share) and E2.4 billion ($3.42 billion). Operating earnings were off 65.2 percent, to E192.1 million ($274.1 million) from the year-ago E552.7 million ($789 million).

K+S no longer expects a normalization of fertilizer demand in second half 2009. For 2009 as a whole, it expects volumes of potash and magnesium to be 4 million mt, down from 2008’s 7 million mt. It also expects moderately declining average prices versus last year. It said the recent $460/mt CFR potash business to India sets an important point of orientation for the world markets, and might contribute to dissipating the purchasing restraint still existing on part of customers.

K+S, citing the extremely difficult and uncertain fertilizer sector, said it will stop publishing quantitative ranges for revenues and earnings for the year as a whole in its second half report. However, it does expect 2009 revenues will fall significantly versus 2008. While it expects significantly higher salt revenues, it says these will not be able to offset the negative development of revenues in the fertilizer sector.