May 14, 2008 / 5:20 AM / 10 years ago

UPDATE 2-Germany's K+S feeds on booming agricultural market

By Mantik Kusjanto

KASSEL, Germany, May 14 (Reuters) - Thriving on booming global demand for fertilisers, Germany’s K+S SDFG.DE ratcheted up its 2008 earnings outlook on Wednesday after posting bumper quarterly profits, sending its shares to record highs.

“Despite the mild winter, it has started well for us. The first quarter of 2008 is the best quarter in history,” Chief Executive Norbert Steiner said at a shareholders meeting.

Like main rivals Potash Corp of Saskatchewan POT.TO and Russia’s Uralkali (URKA.RTS) and Mosaic (MOS.N), K+S has benefited from soaring potash prices because of tight supplies.

Prices of potash — the rarest of three key plant nutrients, with nitrogen and phosphates the others — have soared to record levels.

Farmers around the world are trying to capitalise on rocketing grain prices, which have caused food inflation in some countries and shortages in others.

K+S, the world’s fourth-largest supplier of the crucial ingredient for plants, produces about 7 million tonnes of potash a year, or about 13 percent of global supply.

Shares in K+S jumped 8.4 percent to 320.66 euros by 1049 GMT after hitting a record 322.80 euros. The pan-European chemicals index .SX4P rose 0.6 percent.

Earnings before interest and tax (EBIT) before market value changes from hedging transactions were 226.3 million euros ($350 million), easily exceeding the average estimate of 190 million euros in a Reuters poll of 11 analysts.

Revenue rose 28 percent to 1.21 billion euros, also beating an analysts’ estimate of 1.1 billion.

K+S, the world’s second-largest salt producer after China National Salt, said a tripling of operating earnings is possible this year. Previously, the company expected at least a doubling of its operating profit.

“We believe this momentum is going to increase further in 2008, as the pricing momentum has been strongest only recently,” said Stephan Kippel, an analyst at Commerzbank.

K+S also said it is looking at possible acquisitions and investments to grow its highly profitable fertiliser business.

“We are convinced that it is worth investing in a growing market,” Steiner said. “The strong financial base of the K+S group is a very good basis for doing so, and one that we want to exploit prudently”.

He added that the company was looking at co-operation with local partners when developing so-called greenfield projects.

K+S, a strong candidate to join the German blue-chip DAX .GDAXI index, is worth almost 12 billion euros, up from 800 million in 2002 thanks to its thriving potash business.

Its shares have risen 75 percent this year, making them the best-performing stock in the pan-European DJ chemicals index .SX4P comprising 20 stocks. The index is down 3 percent.

The shares trade at 19 times 2008 estimated profit, compared with Potash Corp’s 20, Uralkali’s 22 and Mosaic’s 12 times. (Editing by David Hulmes)

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