K+S Profit Beats Estimates on Potash Price, Insurance Payout

K+S AG, Europe’s largest potash supplier, reported second-quarter profit that beat analysts’ estimates as demand for the plant nutrient recovered from last year’s slump and the company received an insurance payment.

Earnings before interest, tax and some hedging transactions fell 3.3 percent to 157 million euros ($210 million), the Kassel, Germany-based company said today in a statement. Earnings exceeded the 100 million-euro average of 14 analyst estimates compiled by Bloomberg. Sales tumbled 10 percent to 786 million euros.

“The good salt business in North America and the positive development of our fertilizer specialties were particularly pleasing,” Chief Executive Officer Norbert Steiner said in the statement.

Buyers of potash, a form of potassium that strengthens plant roots and boosts drought resistance, have returned to the market after a plunge in prices last year. That slump followed a move by Russia’s OAO Uralkali, the largest producer, to abandon a trading pact and boost sales.

“The better-than-expected potash volume was due to the restocking of farmers at low price,” Markus Mayer, an analyst at Baader Bank in Unterschleissheim, Germany, who recommends selling the stock, said in a report to clients. “In contrast, expectations regarding potash are bleak” because of those restocking moves.

Competitor’s Forecast

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, raised its full-year earnings forecast in July after saying that Chinese demand for its namesake crop nutrient will be more than previously expected.

The company received an insurance payment in the quarter of 30 million euros following the suspension of operations at the Unterbreizbach salt-extraction site last year. Analysts hadn’t expected the gain.

“Our long-term outlook for K+S remains very cautious” because of the one-time nature of the payment, Jeremy Redenius, a London-based analyst at Sanford C. Bernstein Ltd. who rates the stock underperform, said in a report to clients.

K+S fell as much as 0.6 percent to 24.10 euros and was trading down 0.4 percent at 9:56 a.m. in Frankfurt, reversing a gain earlier in the day. The stock has risen 7.6 percent this year, valuing K+S at 4.61 billion euros.

Full-year Ebit before hedging will amount to 490 million euros to 570 million euros on sales of 3.65 billion euros to 3.85 billion euros, K+S said. That compares with earnings of 656 million euros and revenue of 3.95 billion euros last year.

K+S has a target of saving 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.

A $4 billion development of the Legacy mine in Canada will require an investment of about 800 million euros this year, the company said May 14.

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