K+S Results Up in “Transitional” Year; Bethune a Plus; German Mine to Close

K+S Group pulled back into the plus column for the third-quarter ending Sept. 30, 2017, citing enhanced product availability of specialties and higher fertilizer prices. K+S third-quarter operating earnings (EBIT 1) were €12.3 million on revenues of €726.5 million, up from the year-ago loss of €31.4 million and €687.6 million. EBITDA was €76.7 million, up from €55.9 million.

“Our earnings performance continued to improve in the third quarter, and we made further progress with important environmental and regulatory issues,” said Dr. Burkhard Lohr, K+S board chairman. “Nevertheless, 2017 will remain a transitional year in which we can’t yet fully exploit our strengths.”

As reported earlier, K+S said it is in a transformation phase until 2020. It said the tapping of synergies should lead to positive earnings of at least €150 million per year from the end of 2020. The company expects to return to positive free cash flow by 2019 and to halve indebtedness by 2020. It expects to achieve an investment grade rating in 2023.

K+S anticipates 2017 total EBIT 1 of €260-360 million, up from 2016’s €229 million. It expects EBITDA of €560-€660 million, up from €519 million.

In the Potash and Magnesium Products segment, the company reported EBIT 1 of €1.7 million on revenues of €357.7 million, up from the year-ago loss of €48.9 million and €301.7 million, respectively. The company cited better availability at the Werra plant in Germany and higher average prices. It said stable disposal of saline wastewater lifted production and sales volumes of higher-margin fertilizer specialties. Sales volumes moved up to 1.41 million mt, with an average price of €253/mt from the year-ago 1.26 million mt and €238.80/mt, respectively.

Segment volumes are expected to be 6.8-7 million mt for the year, up from 2016’s 6.1 million mt. K+S cited the positive effects of wastewater disposal at Werra, and the company expects no more wastewater-related standstills for the remainder of the year. Along those lines, the company reported that it has received approval for the early commencement of expansion of its tailings pile at the Hattorf site, and is in settlement negotiations with the Municipality of Gerstungen and BUND (the Federation for Environment and Nature Conservation Germany), relating to the company’s saline injection permit.

In addition, starting in 2018, the company expects positive effects on the disposal situation due to the commissioning of its new kainite crystallization and flotation facility (KCF), which will reduce saline wastewater at the Werra plant by about 20 percent. The company has also hired an outside advisor regarding possible specialty products that could be retrieved during the process.

The Bethune mine in Saskatchewan will add 500,000 mt of production this year, down from earlier estimates of 600,000-700,000 mt, with 2018 expectations of approximately 1.7 million mt. Bethune earnings guidance for 2017 is a loss of just below €150 million, with it becoming EBITDA positive in 2018 and EBIT positive in 2019.

K+S added that the first shipment of Bethune product has arrived in China, and the clients were very happy with the product quality.

The company said that it will soon decide when to close its Sigmundshall mine in Germany, which is currently the deepest active potash mine in the world. Currently, K+S is thinking it will be the end of 2018 or 2019. It wants to give notice well in advance, as some 780 jobs are at stake and the company will need to negotiate with work councils and unions.

K+S said Sigmundshall currently produces some 600,000 mt/y, spanning a whole range of products, including specialty industrial products, with only a slight portion being muriate of potash. Production will ratchet down during the final year. The company said that given the mine’s low efficiency and the overall production environment, the mine’s current EBIT contribution is approximately zero in 2017, with it expected to be slightly negative in 2018. The company said it cannot bring it back into the positive, and that under law the mine must be flooded after it stops production.

Salt EBIT 1 was down 8.7 percent, to €16.8 million on revenues of €328.8 million from the year-ago €18.4 million and €346.4 million, respectively. K+S said sales were moderately below year-ago levels and EBIT 1 was impacted by the effects of Hurricane Irma at the company’s Inagua site in the Bahamas.

Company-wide, nine-month EBIT 1 trailed year-ago numbers by 11.8 percent, at €178.1 million on revenues of €2.6 billion from the year-ago €201.9 million and €2.5 billion, respectively. EBITDA was €389.5 million, compared to the year-ago€424.7 million.