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Revenues and earnings of K+S down significantly in Q3
Nov. 17, 2016
K+S Group revenues fell 22 % to € 2.5 billion in the first nine months of the year (9M/15: € 3.2 billion). Beside a lower price level in the Potash and Magnesium Products business unit, the production limitations at the Werra plant have had the most impact. The mild 2015/16 winter also led to cautious early fills of de-icing salt. Salt business for consumers, food processing as well as for industrial and chemical use on the other hand showed positive results. In the third quarter of 2016, K+S Group revenues amounted to € 688 million (Q3/15: € 891 million).
In terms of results, the price and volume effects could not be absorbed completely by cost savings. Operating earnings (EBIT I) therefore fell by 68 % in the first nine months of 2016 to € 202 million (9M/15: € 628 million) and amounted to € -31 million in the third quarter (Q3/15: € 132 million).
“As expected, the lower prices in the Potash and Magnesium Products business unit as well as continuing production limitations at the Werra plant had an adverse effect on revenues and earnings in the third quarter,” said K+S Board of Executive Directors’ Chairman, Norbert Steiner. “Prices for potassium chloride have stabilised in the meantime. However, production at the Werra plant is still extremely challenging due to the restricted deep-well injection permit.”
Outlook for 2016: Guidance specified
The disposal of production water and tailings pile water needs to be based closely on the flow of water in the Werra river. How much can be discharged into the river at what time is determined by the official threshold values. If the flow of water is low then less wastewater can be discharged. In spite of efficient wastewater management at the Werra plant using available storage basins, further production limitations cannot be ruled out for the rest of the year. In view of this, an EBITDA of between € 500 million and € 560 million (previously between € 500 million and € 600 million) and EBIT I of between € 200 million and € 260 million (previously between € 200 million and € 300 million) is now expected for the whole of 2016.
Medium-term forecast for 2020 remains unchanged
In spite of the numerous challenges, K+S remains optimistic that it will be able to achieve its target of Group EBITDA of around € 1.6 billion in 2020 (2015: € 1.1 billion). The ‘Salt 2020’ strategy is already on track towards achieving the EBITDA target of over € 400 million assuming a normal winter. In the Potash and Magnesium Products business unit, the Legacy Project is encouraging. The current weakness in the potash market should not be sustainable as the medium-term and long-term growth trends remain intact. The Company is also developing numerous strategic initiatives, which should contribute towards achieving this aim.
Source: K+S
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