K+S AG (SDF), Europe’s largest potash maker, rebounded from the lowest in almost six years after Hauck & Aufhaeuser Privatbankiers KGaA said global demand for crops will keep increasing and propel fertilizer-sales growth.
K+S gained as much as 2.9 percent to 26.50 euros, the steepest intraday increase since July 9, and was trading up 1.7 percent at 4:04 p.m. in Frankfurt. Trading volume exceeded the three-month daily average by 48 percent, and the company’s value stood at 5.01 billion euros ($6.58 billion). The stock fell yesterday to the lowest price since September 2007.
“All long-term growth drivers remain well intact, but seem to be ignored by the market,” Nils-Peter Fitzl, Hamburg-based analyst at Hauck & Aufhaeuser, said in a note. “Potash is without substitutes” as a product to generate plant growth, and population increases, an expansion in meat consumption and new demand for biofuels will push the need for crops, said Fitzl, who reiterated his buy recommendation on K+S.
K+S plans to start operating a new plant in Saskatchewan in mid-2016, the Kassel, Germany-based company said in April. The budget for developing the site, which K+S calls the Legacy Project, was increased by 26 percent at the time to C$4.1 billion ($3.9 billion).
“With the new mine in Canada, K+S secures its participation in the growth of the world potash market,” Fitzl said. “The Legacy Project would be still value accretive” if spending on the investment increased by a further 50 percent.
Norwegian competitor Yara International ASA (YAR) said today that global nitrogen demand and European farm margins were “strong” in the second quarter. The company’s stance also probably helped K+S stock by “showing that the demand in Europe has picked up again,” Heinz Mueller, a Frankfurt-based analyst at DZ Bank AG, said by phone.
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