K+S Beats Estimates; Sees First Sign of Potash Price Revival

K+S AG, Europe’s largest potash supplier, said it sees the first signs of recovery in the market for the crop nutrient and reported first-quarter earnings that beat analyst estimates.

Earnings before interest, tax and some hedging transactions, or Ebit I, fell 21 percent to 219.6 million euros ($301.3 million) in the quarter, the Kassel, Germany-based company said today in a statement. Analysts had predicted 193.1 million euros, according to a Bloomberg survey.

Chief Executive Officer Norbert Steiner said today that price levels for potash fertilizers have bottomed out. The company still expects a “significant” profit drop this year as prices remain lower on average. The breakup of an industry cartel in mid-2013 led to a ramp-up in production of the commodity product and prompted a 24 percent price plunge within six months.

“Demand for potash as well as magnesium products is robust and we see signs that the pricing trough is behind us,” Steiner said today at the annual shareholder meeting in Kassel.

K+S shares climbed as much as 3.3 percent to 27.25 euros and were trading up 0.3 percent at 26.48 euros as of 1:13 p.m. in Frankfurt trading. The stock has climbed 18 percent this year for a market value of 5.1 billion euros.

Quarterly sales declined 7.1 percent to 1.19 billion euros, in line with analyst estimates.

Savings Kick-In

The company aims to save 150 million euros this year as part of a 500 million-euro cost-cutting program as it spends less on materials and processes, according to the company.

K+S is sticking to a full-year forecast for a “moderate” decline in sales. The miner will propose a dividend cut of 82 percent to 25 cents a share at its annual shareholder meeting today, it reiterated today.

A $4 billion development of the Legacy mine in Canada will require an investment of about 800 million euros this year, the company said today. Capital expenditures will probably total 1.2 billion euros as the company invests in the prevention of water pollution in its Hesse-Thuringia producing region in Germany.

K+S still expects to earn a 15 percent premium on the cost of capital with its Legacy mine in Canada, Chief Financial Officer Burkhard Lohr said today at the annual meeting. The potash price required to earn that return is 420 euros to 440 euros per ton and the company expects an average of that price over the decades the mine will operate, he said today.

K+S, which plans to spend about C$1 billion ($917 million) a year from 2014 to 2016 on Legacy, has no plans to bring a partner on board or sell part of the asset, executive board member Andreas Radmacher said today.

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