K+S Q2 Earnings Up; 2020 Profit Target Scrapped
K+S Group reported a near doubling in 2017 second-quarter operating earnings (EBIT 1) to €28.5 million ($33.6 million) on revenues of €742 million, up from the year-ago operating earnings of €15.0 million on sales of €732.1 million. Revenues were up just 1 percent year-on-year.
The company attributed the earnings’ boost largely to a significant improvement in the profit trend of the Potash and Magnesium Products business unit, and also a positive currency effect. Second-quarter operating earnings (EBIT 1) for the unit more than doubled from a year-ago, reaching €31.4 million on revenues of €387.1 million, up from €14.7 million and €370.9 million, respectively.
Higher product availability at the Werra plant boosted Potassium and Magnesium’s sales volumes, with no disposal-related interruptions in production during the second-quarter in spite of prolonged low water levels of the Werra River. The company attributed this to an efficient wastewater system. The unit’s sales volumes totalled 1.69 million mt, up 3 percent from 1.48 million mt. This positive effect was offset by higher start-up costs compared to the previous year at the new Bethune potash operation in Canada.
“We are still confident regarding the development for the rest of the year and are reiterating our forecast of a tangible increase in earnings. That said, 2017 will remain a transition year,” said Dr. Burkhard Lohr, K+S board chair.
He warned day-long production stoppages at the Werra plant cannot be ruled out entirely for the second half of the year, but the commissioning of the new KCF facility early next year will lead to a further substantial reduction in the quantity of saline wastewater.
“The successful production start at our new Bethune mine also makes us optimistic about the future,” Lohr said, with the operation’s targeted 2 million mt/y annual capacity anticipated to be reached by the end of 2017.
Six-month group operating earnings (EBIT 1) were 29 percent off at €165.9 million on revenues of €1.87 billion, down from the year-ago €233.3 million and €1.83 billion, respectively. This decline was mainly due to lower average prices for fertilizer specialties as well as in the North American de-icing salt business. Six-month operating earnings for the Potash and Magnesium business unit were down 37 percent, at €73.3 million on revenues of €860.8 million, against the year-earlier €117.0 million and €831.4 million, respectively.
K+S reiterated its EBIT 1 guidance for the year at between €260 and €360 million from €229 million in 2016, on revenues of between €3.6 billion and €3.8 billion (2016: €3.5 billion). For the Potash and Magnesium Products business unit, the company anticipates a “tangible” increase in operating profit, with “far fewer” production suspensions resulting from an improved disposal situation at the Werra sites expected, allowing an earnings’ boost.
However, K+S said its 2020 target for EBITDA of around €1.6 billion is “no longer realistic,” as that goal – set in 2015- was based on a $330/mt price for potassium chloride in Brazil.
“Although the current price trend is pointing in the right direction, it is unlikely that this envisaged figure will be reached,” Lohr said.
K+S said it would publish its new “Shaping 2030” strategy this autumn and its new mid-term and long-term targets at the same time.