* Q2 sales 1.058 bln eur vs 1.029 bln fcast
* EBIT up eight-fold at 155.5 mln eur vs 123 mln fcast
* Gives precise sales, earnings targets
* Sees strong demand continuing in H2
* Shares down 2.6 pct, underperform German market
(Adds analyst comment, shares)
By Nicola Leske
FRANKFURT, Aug 12 German salt miner K+S
SDFG.DE raised its potash sales volume forecast for this year
as a global rebound in demand for fertiliser helped earnings
beat forecasts in the second quarter.
"The welcome development so far this year shows that the
economic situation has bottomed out," Chief Executive Norbert
Steiner said on Thursday. "The positive trend in fertiliser
demand is set to continue in the second half of the year too."
K+S said it based its sales forecast mainly on the
assumption of a stronger recovery of markets in Europe and North
America and higher expected consumption in Latin America.
Wheat farmers, who are benefitting from rising grain prices,
are expected to spend more on fertiliser after holding back
during the financial crisis. Global grain prices have risen
after Russia banned exports due to drought and fires in the
Bigger Canadian rival Potash Corp (POT.TO) of Saskatchewan,
the world's largest fertiliser producer, and U.S. fertiliser
manufacturer Mosaic Co (MOS.N) have also reported strong
second-quarter profit thanks to strong potash sales and higher
margins. [ID:nN28198150] [ID:nN22265581]
K+S, the world's fourth-largest potash supplier, said it
should sell 6.5 million to 7.0 million tonnes of potash products
this year, more than its May forecast of "a good" 6.5 million
Second-quarter earnings before interest and tax, adjusted
for effects from currency hedging instruments, jumped eight-fold
to 155.5 million euros, beating an average forecast of 123
million euros in a Reuters poll.
K+S shares were down 2.6 percent at 0859 GMT, having fallen
as much as 5 percent in early trade as investors that had hoped
for even greater gains or a more bullish outlook sold their
shares for profit, traders said.
"Strong results may be diluted by the outlook, which may
disappoint some overly optimistic 'prices-will-rise-immediately'
participants," brokerage Equinet said in a note, adding that it
remained optimistic in its outlook for K+S, saying that an
increase in volume was more important than rising prices.
"Guidance for 2010 sales is in line but looks disappointing
for EBIT versus our and market estimates," BHF Bank analyst
Annett Weber wrote, adding that revenue for the last quarter was
POTASH BACK IN DEMAND
K+S also gave a more concrete outlook for sales and earnings
after previously only saying it expected significant growth.
In 2010, revenues of between 4.6 billion euros ($5.99
billion) and 5.0 billion euros appeared "realistic from today's
perspective", the group said. Last year, sales were 3.6 billion
euros. Operating earnings are expected to more than double to
between 550 million euros and 600 million euros this year.
It also said it expects demand for fertilisers to increase
significantly this year due to lower stocks at the beginning of
the year and because less fertiliser had been used since late
2008, when farmers had started holding back on potash use
speculating on a decline in fertiliser costs.
Potash stays in the soil longer than other fertilisers such
as nitrogen, allowing farmers to delay using it if they think
prices will fall -- a tactic that intensifies swings in demand.
According to Thomson Reuters StarMine, which weights
analysts' forecasts according to their track record, K+S trades
at 14.6 times its 12-month forward earnings compared with Mosaic
and Potash, which trade at 15.2 times and 17.3 times
(Editing by Erica Billingham)