K+S Group reported a 22 percent increase in full-year 2015 operating income (EBIT), to €781.6 million ($858.7 million) on revenues of €4.18 billion, up from 2014’s €641.3 million and €3.82 billion, respectively. Full-year adjusted group earnings after tax came in 48 percent higher at €542.3 million, up from €366.6 million.
Fourth-quarter operating income (EBIT) increased 18 percent, to €153.6 million on revenues of €992.6 billion, up from the year-ago €130.4 million and €1.02 billion respectively.
“Despite weaker conditions in the potash market, we performed well in 2015 and met our earnings forecast, thanks to our broad product portfolio,” said Norbert Steiner, chairman of K+S’ Board of Executive Directors. The 22 percent increase in EBIT fell within the company’s forecast range of €780-€830 million, albeit close to the bottom end of the range. The increase in operating income was due primarily to the rise in average prices in the Potash and Magnesium Products and Salt business units compared with 2014, as well as the increased strength of the U.S. dollar against the euro, Steiner noted. The company expects to increase dividends 28 percent, to €1.15 from €0.90, at its annual meeting May 11.
Full-year operating income (EBIT) in the Potash and Magnesium Products business unit increased 12 percent, to €546.1 million on revenues of €2.09 billion, up from 2014’s €488.8 million and €1.88 billion. respectively. Fourth-quarter operating income for this business unit came in 50 percent higher at €126.5 million on revenues of €511.0 million, up from the year-ago €84.4 million and €464.5 million, respectively.
K+S reported that “extensive efforts” were continued in 2015 to make the cost and organizational structures of the entire group more efficient, particularly in the areas of production, materials management, logistics, and IT. Under this “Fit for the Future” program, the company is targeting total cost savings of €500 million between 2014 and 2016, and said a good two-thirds of the announced savings already were achieved.
K+S said its Legacy potash project in Saskatchewan remains on its way to commissioning as scheduled in summer 2016, producing the first tons of potash towards the end of the year, and meeting the investment budget of C$4.1 billion (U.S.$ 3.1 billion). The company reported 80 percent of the total budget for Legacy has been spent to date. It invested around €1.3 billion in 2015, much of which was accounted for in capital expenditure for Legacy.
K+S was downbeat in its outlook for 2016, and is expecting a “significantly lower” result. “Along with intense competition, an ongoing difficult economic situation in emerging market countries is expected, continued low agricultural prices, and less availability of credit for farmers, particularly in Latin America, the downturn in the potash market, which became apparent in the second half of 2015, may continue this year,” the company said. It added that temporary production cuts at its Werra plant cannot be ruled out this year, given the restrictions placed on the permit to inject saline wastewater at the Hattorf site (see separate news item).
K+S consequently anticipates a “significant drop” in average prices in the Potash and Magnesium Products business unit, as well as sales volumes “slightly below” those of 2014. Overall, the company sees a “moderate decrease” in its revenues year-over-year in the 2016 financial year, while operating earnings (EBITDA and EBIT) are expected to be “significantly lower” than for 2015, and adjusted group earnings consequently also will be “significantly below” last year’s numbers.