November 12, 2008 / 6:32 AM / 11 years ago

UPDATE 2-K+S Q3 profit jumps, tones down sales outlook

* Q3 oper profit up sixfold at 502.2 mln euros

* Beats 430 mln euro poll estimate

* Tones down FY sales outlook but sees gain in 2009

* Shares rise as much as 6 percent before retreating

(Adds shares, details, background, analyst comment)

By Ludwig Burger

FRANKFURT, Nov 12 (Reuters) - German fertiliser supplier K+S SDFG.DE toned down its 2008 sales outlook to reflect the more cautious earnings forecast it issued last month but added that a rebound in fertiliser demand could be in the offing next year.

The world’s fourth-largest potash miner expects group sales to increase in 2009, banking on a rebound in grain prices because the current slump lacked a “fundamental explanation”, it said on Wednesday.

Third-quarter operating profit jumped more than sixfold, better than expected, on surging demand for its plant nutrients potash and magnesium.

Its shares climbed as much as 6 percent in early trade but were down 2.1 percent at 32.65 euros by 0956 GMT, while the German benchmark DAX was off 0.4 percent.

Quarterly earnings before interest and taxes and excluding swings in currency hedging instruments (EBIT I) jumped to 502.2 million euros ($640 million) from 79 million euros a year earlier, exceeding the average estimate of 430 million euros in a Reuters survey of 11 analysts.

The company, also the world’s second-largest salt producer after China’s National Salt, reiterated its full-year outlook for EBIT I of 1.4 billion euros.

K+S cut its 2008 earnings outlook in October, just two months after lifting it, after the financial crisis put an abrupt end to the agricultural commodities boom, suppressing fertiliser demand.

Full-year sales should rise to just under 5.3 billion euros, the lower end of its previous target range of 5.3-5.5 billion euros, it said on Wednesday.

Financial investors who took on debt to bet on rising soft commodities prices have started selling to deleverage.

Commerzbank analyst Stephan Kippe said the slump in grain prices was as much an exaggeration as the boom that preceded it, and maintained his “buy” rating on K+S.

“Even in a global recession, food demand would remain flat for maybe a year at worst but would not fall because of population growth,” he said. “Even a further decline in grain prices would make an even stronger rebound at a later stage almost inevitable.”

Potassium chloride, which is extracted from potash ore, is one of three main nutrients used in synthetic fertilisers alongside nitrogen and phosphorus.

K+S shares trade at 4 times estimated 2009 earnings after they slumped from their record high of 95.9 euros in June to below 34 euros.

Potash Corp of Saskatchewan POT.TO, the world’s No. 1 potash producer, trades at about 4.7 times earnings, while the multiple for Mosaic (MOS.N), another rival, is about 3. (Editing by Will Waterman)

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