K+S Group, Kassel, has raised its outlook for operating EBITDA for full-year 2021 to around €630 million (approximately $731 million at current exchange rates), citing a further improvement in expectations for the development of average prices in the Agriculture customer segment as mainly behind the guidance raise. Previous guidance was €500 million to €600 million.
The forecasts exclude the expected one-off gain of about €200 million from the REKs joint venture waste management transaction.
However, K+S disclosed in its statement on Oct. 26 that the antitrust clearance for the transaction may not be granted in 2021, as previously assumed. The company said the E.U. Commission has referred the antitrust clearance procedure to the Federal Cartel Office, and the review of the REKS transaction is still ongoing.
K+S said it continues to believe a release can be granted.
The completion of the antitrust review of the REKS jv originally had been expected to take place this past summer, but in August K+S said it was expected to be delayed until the fourth quarter of the year (GM Aug. 6, p. 33).
K+S and Germany’s Remex GmbH reached an agreement in December 2020 to partner up to bundle their respective waste management activities in a new jv, REKS GmbH & Co. KG, in which both companies would be equal partners, each with 50 percent participation (GM Dec. 31, 2020).
As a result of the expected completion of the REKS transaction now delayed into 2022, only K+S’ operating business is now included in the FY 2021 EBITDA guidance. The company’s previous guidance – issued on Aug. 3 – for full-year EBITDA from continuing operations of between €700-€800 million included the expected one-off gain from the REKS transaction.
K+S in this week’s statement said it now expects free cash flow in FY2021 to break even. Previously, it had expected a negative €180 million, excluding the REKS cash inflow.
The company’s shares closed 5.2 percent lower on Oct. 26 after the company disclosed the antitrust clearance for its REKS transaction may not be granted in 2021. But its shares subsequently bounced back this week as the market digested the guidance raise.
Paris-based Franco-German financial services group Oddo BHF noted that K+S’ new guidance “is ahead of its clean estimate,” which excludes gains from the REKS jv, Bloomberg reported. Oddo anticipates that 2022 will include the “lion’s share” of the recent surge in potash prices on the bottom line for K+S.
UBS sees the free cash flow as the main positive from the update, with guidance well ahead of the broker’s expectations, according to the Bloomberg report.
K+S will publish its third-quarter financial results and full-year outlook for 2021 on Nov. 11.