K+S Group posted a 120% rise in EBITDA to €2.42 billion (approximately $2.58 billion at current exchange rates) for the 12 months to Dec. 31, 2022, up from €1.1 billion, and beating the average analyst estimate of €2.38 billion.
Revenues increased 77%, to €5.68 billion from €3.21 billion the previous year.
Adjusted net profit for the full year came in at €1.49 billion compared with just €311.7 million (the FY2021 figures exclude impairment effects).
K+S said in a March 15 earnings statement the result was the best in the company’s history. It cited significantly higher average prices in the Agriculture customer segment and for Industrial products containing potash, which more than offset lower sales volumes and higher costs as driving the profit and revenues boost.
The company also highlighted that by concluding long-term gas supply contracts at an early stage, cost increases for energy “in the mid three-digit million euro range” were avoided.
“Due to our long-term supply contracts, 90% of our natural gas demand in Europe (6 TWh) was hedged at around €40/MWh. Compared to the average TTF natural gas price of about €120/MWh in 2022, we saved more than €400 million of opex,” the company said at a company earnings presentation on March 15.
K+S said the hedging ratio of 90% for 2023 is about €50/MWh, and >70% for 2024 is at about €40 /MWh, and about 10% for 2025.
The company reminded it is not making use of the German price cap, and thus “even if gas prices rise above the cap, we will not experience any significant negative impact due to our forward-looking hedging strategy,” it said.
For the fourth quarter, K+S reported a 14% increase in EBITDA to €559.2 million on revenues of €1.46 billion, up from the same prior-year period of €489.9 million and €1.07 billion, respectively. Revenues in the quarter increased 39% from a year-ago.
Adjusted net profit for the fourth quarter increased 43%, to €366.3 million compared with the year-ago €255.4 million (4Q 2021: without reversal of impairment losses and REKS gain included).
After the jump in profits, K+S intends to raise the full-year 2022 dividend to €1.0 per share versus the €0.20 paid in FY2021. It also plans after its May AGM to start a share buyback for up to €200 million.
Looking ahead, K+S expects EBITDA operating earnings to fall in FY2023 after the exceptionally strong FY2022. FY2023 EBITDA operating earnings are expected to range between €1.3-€1.5 billion.
The company expects “demand to increase” this year and an “attractive price level overall,” albeit at a lower level than in FY2022. K+S expects potash supply from Russia and Belarus to remain limited. At the same time, it sees costs, especially for energy, logistics, materials, and personnel, to continue to increase.
K+S FY2023 EBITDA guidance is below the average analyst estimate of €1.68 billion (Bloomberg Consensus).
Analyst Markus Mayer of Baader Bank, for one, considers the outlook too cautious.
In terms of individual customer segments, K+S’ Agriculture customer segment posted a 97% increase in revenues for the full-year 2022, to €4.47 billion, up from the year-ago €2.27 billion, boosted by the significantly higher prices and despite lower sales volumes.
The company noted potash prices rose “very significantly” in all sales regions in the first half of 2022 amid good demand and limited supply, while in the second half of the year, prices “normalized at a high level,” albeit with regional differences, as customers adopted a wait-and-see attitude.
The segment’s total sales volumes fell 7% to 7.11 million mt, down from 7.62 million mt the previous year.
K+S Agriculture Customer Segment
| 4Q-2022 | 4Q-2021 | % change | FY2022 | FY2021 | % change | |
| Revenues € million | 1,114.6 | 800.3 | +39 | 4,465.6 | 2,272.1 | +97 |
| Potassium chloride | 722.5 | 494.3 | +46 | 2,976.5 | 1,349.3 | +121 |
| Fertilizer specialties | 392.1 | 306.0 | +28 | 1,489.2 | 922.8 | +61 |
| Sales volumes Million mt | 1.89 | 1.96 | (4) | 7.11 | 7.62 | (7) |
| Potassium chloride | 1.20 | 1.14 | (5) | 4.44 | 4.69 | (6) |
| Fertilizer specialties | 0.68 | 0.81 | (16) | 2.67 | 2.94 | (9) |
| Revenues | ||||||
| Europe (€ million) | 406.8 | 297.7 | +37 | 1,671.6 | 950.9 | +76 |
| Overseas $ million) | 722.3 | 584.5 | +24 | 2,931.6 | 1,562.5 | +88 |
| Sales volumes Million mt | ||||||
| Europe | 0.66 | 0.80 | (18) | 2.81 | 3.23 | (13) |
| Overseas | 1.23 | 1.16 | 6 | 4.30 | 4.39 | (2) |
| Average price (€/mt) | 592.2 | 407.6 | 628.1 | 298.0 | ||
| Europe (€/mt) | 617.7 | 372.1 | 594.1 | 294.0 | ||
| Overseas ($/mt | 585.6 | 503.9 | 682.4 | 356.0 |
K+S reported its Industry+ customer segment “with its wide range” of product applications, was characterized overall by a positive trend in demand, with prices rising for both potash and salt. Segment revenues increased 29% to €1.21 billion in FY2022, up from the previous year €941.0 million.
Full-year sales volumes for Industry+ fell 14% year-on-year, down to 6.83 million mt from 7.91 million mt. Of the total, de-icing salt sales volumes declined by 35% to 2.08 million mt, from 3.18 million mt the previous year.