K+S Proposes 82% Dividend Cut to Help Pay for Canada Legacy Mine

K+S AG (SDF), Europe’s largest potash supplier, suggested an 82 percent cut in its annual dividend payment, retaining part of the cash to pay for its new mine in Canada. The stock dropped as much as 3.6 percent.

The dividend proposal is 0.25 euros ($0.35) a share, a payout ratio of 11 percent based on 2013’s adjusted earnings after tax, the Kassel, Germany-based company said today in a statement. K+S, which paid 1.40 euros the previous year, plans to return to its dividend policy of paying 40 percent to 50 percent “as soon as possible,” it said today.

Chief Executive Officer Norbert Steiner is pushing ahead with the $4 billion development of the company’s new Legacy mine in Canada. K+S last month completed a test cavern, even after global potash prices fell as much as 24 percent.

“Uncertainty in the market for potash and magnesium products as well as major investments planned for the long-term strengthening of the company” are the reasons for deviating from the usual dividend policy, K+S said today.

The shares dropped as much as 90.5 cents, the steepest intraday decline in almost six weeks, to 24.145 euros in Frankfurt trading. The stock was down 2.9 percent as of 1:43 p.m. local time. K+S has gained 9 percent this year for a market value of 4.7 billion euros.

Earnings before interest, tax and excluding some hedging transactions -- dubbed Ebit I by the company -- declined 18 percent to 656 million euros last year, beating a 633.9 million-euro analyst estimate. Sales were 3.95 billion euros, little changed from the previous year’s level. Analysts had predicted 3.86 billion euros, according to a Bloomberg survey.

Savings Program

Steiner has started a 500 million-euro savings program over three years in response to lower potash prices. The bulk of the planned savings, under a program named “Fit for the Future,” will stem from material costs, though the company is also considering job cuts, K+S said in November.

Potash Corp. of Saskatchewan Inc. forecast 2014 earnings that trailed estimates in January. The Canadian company predicted profit as much as 30 percent lower than predicted in a Bloomberg survey of analysts.

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

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

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