K+S earnings, sales down on lower salt volumes, potash prices

12:27 PM | May 11, 2020 | Ian Young

K+S (Kassel, Germany) reports a 76% fall in first-quarter adjusted net profit compared with the corresponding period of the previous year, to €26 million ($28 million). The company says that a weaker deicing salt business in Europe and North America as a result of mild weather conditions, as well as lower prices for potash fertilizers, resulted in a year-on-year (YOY) revenue decline of about 14%, to €1.1 billion with EBITDA down 25%, to €201 million.

The company’s Americas operating unit reported a slight decline in EBITDA to €102 million in the first quarter, compared with €108 million in the same period of the previous year. Cost discipline as well as higher earnings contributions in the industrial and consumer customer segments were the key factors and largely made up for weather-related decreases in deicing salt volumes, K+S says.

In the Europe operating unit, lower prices for potassium chloride in the wake of potash market weakness resulted in a YOY decline in EBITDA to €114 million from €177 million. There were significantly lower deicing salt volumes as a result of the mild winter, K+S says. This was offset by higher potash sales volumes at lower average costs.

K+S says that, during the coronavirus disease 2019 (COVID-19) pandemic, it has been able to ensure the supply of essential products to its customers in the pharmaceuticals, food production, feed, agriculture, and chemical industries. As a result of extensive measures taken to protect employees, production has been running at almost all sites without interruption, and supply chains are largely stable. “So far, we have been getting through the corona pandemic well overall. With our products and services, we are in a position to make an important contribution to the supply of essential goods to the population and important key industries,” says K+S chairman Burkhard Lohr.

K+S has specified its earnings guidance for 2020. The company expects full-year EBITDA of about €520 million, having previously provided an estimated range of €500–620 million. The company posted 2019 EBITDA of €640 million.

“The contract concluded by the major potash producers with Chinese customers should result in a bottoming out of overseas prices for potassium chloride,” K+S says. The company says that, in its previous forecast, it had assumed an earlier settlement, which did not take place until the end of April and at a lower level than expected, because of COVID-19. “This has an impact on the expected recovery in potash prices this year,” K+S says.

The company, meanwhile, expects full-year deicing salt sales volumes to be 8 million metric tons (MMt), compared with 12.5–13.0 MMt in a “normal year.”

K+S says that, despite COVID-19, the divestment process initiated for its Americas operating unit continues to proceed according to plan. A sales agreement is expected before the end of this year. Meanwhile, a project to streamline administrative functions at the company’s Kassel and Hanover, Germany, sites—part of the same restructuring as the Americas divestment—has started.