November 12, 2009 / 6:38 AM / 10 years ago

UPDATE 3-K+S cautious on 2010 potash demand; no cash call

* Q3 EBIT ex-forex hedging 9.4 mln eur vs 18 mln in poll

* Sees 2010 global potash demand at 45 Mt vs PCS’s 50 Mt

* Cuts 2009 sales volume assessment; warns on prices

* Stock up 2.3 pct as cash call averted

(Adds analyst comment, shares)

By Ludwig Burger

FRANKFURT, Nov 12 (Reuters) - German potash miner K+S SDFG.DE was cautious on 2010 fertiliser demand and warned on prices when reporting earnings on Thursday, although a feared cash call failed to materialise, sending its shares higher.

The world’s fourth-biggest potash supplier said global demand for the mineral should rise to 45 million tonnes in 2010 from around 30 million in 2009, a year in which demand slumped sharply, underlined by K&S’s forecast-lagging quarterly earnings.

Industry leader Potash Corp of Saskatchewan POT.N recently said it sees demand next year at around 50 million tonnes.

K&S’s third-quarter operating profit, excluding currency hedges, fell to 9.4 million euros ($14.08 million) from 502 million last year, on higher costs at its nitrogen business, below an average estimate of 18 million in a Reuters poll.

The weaker than expected headline earnings figures initially sent K&S stock lower, before the move was reversed on forecast beating earnings at its main potash unit and the lack of a cash call, which some in the market had expected.

The $1.7 billion takeover of U.S. salt miner Morton Salt had strained K+S’s finances, leading the German company to consider a capital hike. [ID:nN23347298]

At 1336 GMT, shares in the company were trading up 2.3 percent at 38.7 euros, while Germany's main DAX index .GDAXI was flat.

Demand for potash has been hard hit by the economic downturn as investors rushed into, and later abandoned, agricultural commodities - and K&S’s quarterly report suggested a strong recovery was still some way off.

Third-quarter revenue at the former BASF BASF.DE subsidiary more than halved to 698.1 million euros, slightly worse than the 712 million expected, as sales volumes slumped.

“This remains a very difficult market environment. Average euro potash spot prices are still sliding,” Equinet analyst Michael Schaefer commented.

Potash lasts longer in the soil than fertilisers like nitrogen, giving farmers leeway to delay its use when they foresee falling prices, which has aggravated swings in demand.

The industry is also awaiting crucial pricing news on new exports to China, the world’s largest buyer. [ID:nN2430059]


K+S, which traces its roots to a 19th-century salt mine, reiterated its more stable salt business would only partially offset a sharp drop in 2009 group revenue and fertiliser sales volume, and that operating earnings would fall sharply.

Chief Executive Norbert Steiner, a former customs lawyer at BASF who is said to take a no-nonsense approach to management and to despise chain-of-command protocols, has taken a more pessimistic view than global peers throughout the crisis.

K+S stuck to its initial assessment of output cuts earlier this year, while major peers were forced to make follow-up announcements of temporary closures of mine shafts.

K+S, also the world’s largest salt producer, repeated on Thursday that its 2009 potash products sales volume would slump to 4 million tonnes from the 7 million chalked up in 2008.

Should potash prices slide further, the negative effect on sales and the bottom line would be considerable, the company warned.

Potash Corp said last month that quarterly profit fell 80 percent as fertiliser demand and pricing weakened, prompting it to dim its outlook for the sector. [ID:nN22505738]

K+S trades at 16 times next year’s estimated earnings, according to StarMine, which weights estimates according to analysts’ track record. That is above multiples of peers including Potash Corp, Yara (YAR.OL) and Mosaic (MOS.N). ($1=.6674 Euro) (Additionals reporting by Andreas Kroener; Editing by Joel Dimmock and Simon Jessop)

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