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K+S Says New Mine Proceeding Even Amid ‘Incomprehensible’ Prices

K+S AG (SDF), Europe’s biggest potash producer, said its new Legacy mine in Canada is proceeding on schedule even as potash prices become “incomprehensible.”

“We see no reason to call this forward-looking project into question because of mere speculation,” Chief Executive Officer Norbert Steiner said today in a video on the Kassel, Germany-based company’s website. “We have seen phases of market disruption in the past and we know how to deal with them.”

K+S abandoned its full-year forecast for sales and earnings growth a week ago after Russian competitor OAO Uralkali pulled out of a trade cartel for the crop nutrient, causing the German company’s stock price to slump 30 percent since the end of July. Several small potash deals struck early this month indicated a price drop of about $50 per ton, Jeremy Redenius, an analyst at Sanford C. Bernstein, said in a report on Aug. 9. That compares with $400 a ton for previous shipments by the cartel to China.

Second-quarter earnings before interest, tax and some hedging transactions, which K+S calls EBIT1, dropped 26 percent to 162.6 million euros ($216.4 million), the company said today. Profit missed an average analyst estimate of 175.2 million euros. Sales fell 12 percent to 874.5 million euros, also missing a 918.3 million-euro estimate.

In contrast to competitors exclusively focused on potash, K+S has a “second pillar” in the form of its salt business, Steiner said today. K+S generated about 38 percent of revenue from the salt unit last year.

The company is sticking to plans for about 375 million euros in investments this year at the Legacy mine in Saskatchewan, K+S said. The German potash producer also said the mineral composition at mines in its home country are the only ones in the world that contain magnesium and sulfur in addition to potassium. The specialized fertilizer it derives from that make-up are only affected to a limited extent to volume competition from standardized products.

To contact the reporter on this story: Sheenagh Matthews in Frankfurt at smatthews6@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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