K+S AG fell as much as 5.5 percent, the only stock on Germany’s benchmark DAX Index to decline, after Europe’s largest producer of potash forecast operating profit growth for 2011 that fell short of analysts’ estimates.
Earnings before interest and taxes and excluding some hedging transactions, which K+S calls Ebit I, will increase to within a range of 950 million euros ($1.4 million) and 1.05 billion euros, the Kassel, Germany-based company said in a statement today. That compares with the 1.06 billion-euro average of 24 estimates compiled by Bloomberg.
K+S has raised prices for potash for customers in Europe, its main market, six times since March 2010 as growing demand for agricultural products provides incentives for farmers to apply more fertilizers. The company until now has forecast a “strong increase” in operating profit in 2011, without providing numbers. K+S also said today that spending on personnel, energy and raw materials will rise.
“Market fears reflect lower potash prices in 2012, which cannot be calmed down by the positive outlook for second-half earnings,” Andreas Heine, a Munich-based analyst at UniCredit SpA with a “hold” recommendation on K+S shares, said today in a research report.
K+S fell as much as 2.33 euros to 40 euros and was down 4.8 percent as of 10:05 a.m. in Frankfurt trading. The shares are trading at about a one-year low, based on closing prices.
Full-year sales will rise as much as 14 percent to within a range of 5 billion euros to 5.3 billion euros, with net income gaining as much as 41 percent. The revenue outlook compares with the average 5.5 billion-euro average of 28 estimates. Ebit I last year totaled 714.5 million euros and net income amounted to 445.4 million euros.
“We are not concerned that the market has still higher estimates, as K+S always leaves some room for further upgrades in targets in the rest of the year,” Martin Roediger, a Frankfurt-based analyst at Credit Agricole Cheuvreux, said in a report. He expects the shares to “outperform” and to rise to 70 euros within six months.
Second-quarter Ebit I rose 38 percent to 191.9 million euros, missing the 198.6 million-euro average of 19 analyst estimates compiled by Bloomberg. Sales rose 11 percent to 1.05 billion euros. Net income fell 70 percent to 29.2 million euros as the company booked a 104 million-euro impairment loss from the sale of its Compo garden-fertilizer unit announced June 20.
K+S adjusted reported sales and earnings to reflect for the disposal.
K+S sold 1.66 million metric tons of potash in the quarter, a decline of 5 percent from a year earlier, while the average price charged increased 12 percent to 302.30 euros a ton. That compares with a 32 percent jump in sales volume, and a 34 percent average selling-price increase to $416 a ton, at competitor Potash Corp. of Saskatchewan Inc.