K+S AG (SDF) Chief Executive Officer Norbert Steiner said he will announce steps to improve efficiency at the German potash producer in order to secure profitability and liquidity.
All units at the Kassel-based company will have to make a “significant” contribution, the CEO said in a letter to workers. Current measures aren’t sufficient from today’s perspective, so new actions will be outlined “in the near future,” he said.
Steiner’s call for cost reductions comes a month after OAO Uralkali, the biggest potash producer, said it would quit a production cartel and increase volumes of the crop nutrient. As a result, the Russian company predicted that prices for potash could drop by one-quarter.
“We should prepare ourselves for tougher times,” Steiner said in the letter. “It is quite clear that the global potash market has adjusted to lower prices. We are seeing a noticeable reluctance among customers to make purchasing decisions because no new, stable price level has emerged so far.”
K+S is “firmly committed” to its new Canadian mine called Legacy as it is of “exceptional strategic importance,” Steiner said in the letter. The CEO’s statements come as the viability of the mine has been questioned.
“We believe that K+S cannot continue with the investment into its Canadian greenfield expansion Legacy,” John Philipp Klein, an analyst at Berenberg, said in an Aug. 1 note to clients. The company would run into a cash shortfall if it continues with the project as planned, Klein said.
K+S on Aug. 6 abandoned its full-year target to increase profit “slightly,” saying Uralkali’s action had created “considerable uncertainty” in the market.
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