August 15, 2019 / 9:15 AM / 4 months ago

UPDATE 2-K+S cash flow boost and earnings growth lift shares

* Q2 revenues, free cash flow beat expectations

* K+S raises 2019 EBITDA guidance midpoint

* Issues 2019 cash flow guidance ahead of consensus

* Shares rise 5% in early trade (Updates with share price, analyst comment, detail)

By Silvia Recchimuzzi

Aug 15 (Reuters) - Germany’s K+S beat second-quarter cash flow expectations on Thursday and was upbeat about its full year performance, sending shares in Europe’s biggest salt and potash miner up 5% in early trade.

Higher fertilizer prices and higher potash production volumes at its plants in Germany and Canada boosted earnings before interest, taxation, depreciation and amotisation (EBITDA) by 24% to 130 million euros ($145 million), though missing a 135.5 million euros forecast in a company-provided consensus.

K+S narrowed its full-year EBITDA outlook to 730-830 million euros from 700-850 million euros.

It also reported adjusted free cash flow of 102 million euros which was far above a forecast of a 4.3 million euro outflow thanks to the improvement in operating earnings and net working capital, and said it expected full-year adjusted free cash flow of at least 100 million euros.

The company’s full-year free cash flow has been negative in the last five years.

K+S shares were up 3% at 0910 GMT, outperforming the German mid-cap index

“The development of cash flow is very positive, and our earnings growth even accelerated somewhat,” Chief Executive Burkhard Lohr said in a statement.

Warburg Research analyst Oliver Schwarz said second-quarter and projected full-year free cash flow far exceeded expectations and would reassure investors who were not fully convinced the company would meet its targets.

“Given the steep decline in shares ahead of the publication of Q2 numbers, it seems like investors were not very assured about K+S reiterating its guidance,” Schwarz said.

The world’s largest producer of salt for food and de-icing said it had increased its storage capacity for saline waste water, a byproduct of potash processing, at its Werra site in Germany, which should prevent even a prolonged drought from disrupting output.

Production stoppages at the Werra plant have plagued K+S in recent years and forced the company to cut its forecasts twice last year because a drought kept water levels in the German river too low for waste water release.

The company also said it expected a stronger dollar to more than make up for the extended maintenance period at its Bethune plant in Canada as well as a temporary effect of a Chinese import ban on potassium chloride.

K+S said second-quarter revenues rose 8% to 879 million euros, slightly above a company-provided consensus of 871.6 million euros.

$1 = 0.8973 euros Reporting by Silvia Recchimuzzi in Gdynia;Editing by Tomasz Janowski and Elaine Hardcastle

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