K+S
Group on March 14 posted a 71% decline in EBITDA, to €712.4 million
(approximately $779.1 million at current exchange rates) for the 12 months to
Dec. 31, 2023, down from €2.42 billion the previous year but beating analysts’ average
estimate of €691.6 million (Bloomberg Consensus).
EBITDA came in a little above the midpoint of K+S’s forecasted guidance for
FY2023 of €600-€800 million (GM Nov.
17, 2023), which it lowered in late July due in part to lower potassium
chloride prices in the second quarter, particularly in the Brazilian market (GM July 28, 2023). The original EBITDA
forecast for FY2023 was €1.15-€1.35 billion (GM May 12, 2023).
FY2023 revenue fell 32%, to €3.87 billion from the prior year’s €5.67 billion, while adjusted net income for the year slumped by 89%, to €161.9 million from €1.49 billion, missing analysts’ estimate of €178.1 million.
Agriculture customer segment revenues fell 39%, to €2.72 billion from €4.47 billion in 2022, with K+S citing mainly price factors. It noted that price pressure intensified after the conclusion of China’s contract price at the lower-than-expected $307/mt CFR level and spread into other sales regions. It said the subsequent price recovery later in the year could not offset that development.
On a positive note, K+S said the segment’s sales volumes increased 3%, to 7.31 million mt from 7.11 million mt in 2022. Sales volumes in Europe grew by 6%, to 2.97 million mt from 2.81 million mt, while Overseas volumes were up 0.9%, to 4.34 million mt from 4.30 million mt. Overseas sales volumes dipped 7% in the fourth quarter of 2023, to 1.14 million mt.
Potassium chloride sales volumes were up 4% in 2023, to 4.62 million mt from 4.44 million mt in the previous year. Fertilizer specialties sales volumes grew 1%, to 2.69 million mt, and were up by 21% year-over-year in the fourth quarter.
K+S Chairman and CEO Burkhard Lohr told analysts at a company earnings call on March 14 that K+S has seen its market share grow in Europe and that demand is higher than a year ago and prices are quite stable. He said K+S currently isn’t doing much in Brazil, and will potentially ship less than 100,000 mt to that country in the first quarter.
Lohr said the company expects to produce roughly 2.3 million mt at Bethune, Sask., in 2024 after recording output of 2.1 million mt last year. The plan is to add 100,000-150,000 mt output there every year, he said.
| 4Q-2023 | 4Q-2022 | % change | FY2023 | FY2022 | % change | |
| Total Sales Volumes (million mt) | 2.04 | 1.89 | +8 | 7.31 | 7.11 | +3 |
| Europe | 0.90 | 0.66 | +36 | 2.97 | 2.81 | +6 |
| Overseas | 1.14 | 1.23 | (7) | 4.34 | 4.30 | +1 |
| Potassium Chloride | 1.22 | 1.20 | +2 | 4.62 | 4.44 | +4 |
| Fertilizer Specialties | 0.82 | 0.68 | +21 | 2.69 | 2.67 | +1 |
| Average Price €/mt | 333.9 | 592.2 | – | 372.1 | 628.1 | – |
| Europe €/mt | 367.0 | 617.7 | – | 404.8 | 594.1 | – |
| Overseas $/mt | 330.8 | 585.6 | – | 377.7 | 682.4 | – |
| Potassium Chloride €/mt | 315.2 | 602.1 | – | 359.4 | 671.0 | – |
| Fertilizer Specialties €/mt | 361.7 | 576.6 | – | 393.9 | 557.0 | – |
Revenues declined 5% in the Industry+ customer segment, to €1.15 billion from €1.21 billion the previous year. K+S said lower prices for industrial products containing potash were offset by rising prices for salt products.
Industry+ sales volumes were down 3% year-over-year, to 6.62 million mt from 6.83 million mt. De-icing sales volumes showed a modest increase of 1%, to 2.10 million mt from 2.08 million mt.
Despite the upheaval in the market over the past two years and challenges on the cost side, Lohr said K+S is optimistic that the balance between supply and demand in the potash market can return in 2024.
“The observable return of supply from Russia and Belarus outside Europe and North America should be accompanied by a further normalization on the demand side worldwide,” the company said. “An oversupply on the potash market is, therefore, not to be expected for the year as a whole.”
K+S expects global potash demand to rise by 4 million mt in 2024, with nearly the same amount of additional supply coming mostly from Belarus and Russia, Lohr told analysts.
K+S expects EBITDA of €500-€650 million for FY2024. The upper end of the range assumes a price recovery overseas during the spring season and sales volumes in the Agriculture customer segment of 7.6 million mt, up from 7.31 million mt in 2023.
The company warned, however, that EBITDA could be at the lower end of the range with fertilizer sales volumes at 7.3 million mt if potash prices in Brazil remain at February 2024 levels, which is estimated at $290/mt CFR, with possible spillover effects into other sales markets.
“We have a strong footprint in Europe and we have specialties, and that is what makes us optimistic for 2024,” Lohr said.
K+S said it expects energy and freight costs to decrease by some €100 million in 2024 compared with 2023, based on the midpoint of sales volume guidance of 7.3-7.6 million mt. The company noted it had achieved a hedging of less than €40 per megawatt hour in gas, and said the unhedged part will be below that. In terms of labor costs, K+S said it has reached a settlement of a 2% increase for 2024.
K+S expects adjusted free cash flow in 2024 to break even, taking into account the continued high level of capital expenditure of around €550 million, particularly in the strategic projects at Werra in Germany and Bethune in Canada. FY2023 adjusted free cash flow was €311 million versus €932 million in FY2022.
K+S is proposing a dividend of €0.70 per share for 2023, below analysts’ estimate of €0.76 (Bloomberg Consensus). The company paid a dividend of €1.00 per share for 2022.
Several analysts saw K+S’s results as “encouraging” and noted the positive tone for the start of 2024. The company’s shares rose as much as 7.2%, the most in four months, immediately following the release of its results.
Citi analysts led by Ranulf Orr, as cited by Bloomberg, said “the ground seems set for earnings to continue to inflect upwards into 1Q” due to “supportive” farm economics. But Baader analyst Konstantin Wiechert highlighted the implied dividend miss to market expectations, and noted the FY2023 free cash flow was weaker than expected.
Morgan Stanley analysts Lisa De Neve and Jonathan Chung said that although K+S’s FY2024 outlook is “soft,” the free cash flow guidance brings some relief.