August 13, 2009 / 9:00 AM / 8 years ago

UPDATE 2-K+S Q2 oper profit slumps, cuts 2009 forecast

* Q2 operating profit down 94.5 pct at 18.1 mln euros

* Sees sharp decline in profits in 2009

* Sales volume outlook cut

* CEO plays down options for collaboration with EuroChem

* Shares rise 2.6 pct

(Recasts lead, adds sales volume outlook, CEO comments)

FRANKFURT, Aug 13 (Reuters) - German fertilizer and salt company K+S AG SDFG.DE predicted full-year earnings would fall sharply and lowered its sales volume outlook after operating profit plummeted in the second quarter.

“There is no sign yet of the normalisation of demand,” Chief Executive Officer Norbert Steiner said on Thursday.

Quarterly operating profit, excluding currency hedging instruments, slumped to 18.1 million euros ($25.6 million) from 326.4 million euros a year earlier, and was below the average estimate of 33 million euros in a Reuters poll of 13 analysts.

Sales at the world’s fourth-biggest potash supplier dropped 37.6 percent to 738.7 million euros, slightly worse than the 747 million expected.

K+S, soon to be the world’s largest salt producer, estimated that 2009 potash products sales volume would slump to 4 million tonnes, down from a June estimate of up to 4.5 million tonnes and well below the 7 million tonnes chalked up in 2008.

Demand for potash -- a key nutrient in synthetic fertilisers alongside nitrogen and phosphorus -- has been buffeted by the boom and bust of financial markets over the last two years as investors rushed into and later abandoned agricultural commodities.

Fertiliser peers including Potash Corp (POT.TO) (POT.N), the world’s largest, Mosaic Co (MOS.N) and nitrogen specialist Yara (YAR.OL) have also recently reported sharp falls in second-quarter profit.[ID:nBNG368711] [ID:nN22333827] [ID:nLF256714]

POTASH PRICE BELLWETHER AWAITED

Global potash suppliers, dominated by Canadian and Russian miners, have reined in production but prices have still crumbled in recent months. The industry is eagerly awaiting the outcome of bellwether price negotiations with China’s import monopoly, the world’s largest potash user.

“We see no indications of a potash volume pick-up, and the pricing situation remains highly uncertain,” said BHF bank analyst Annett Weber.

K+S shares rose 2.9 percent to 38.3 euros at 0735 GMT, while the European DJ Stoxx Chemicals Index .SX4P was up 1.3 percent. Before today K+S shares had lost 5.5 percent this months.

Sales of global potash miners could slump to 40 million tonnes this year and the industry is unlikely to see a return to levels of about 60 million tonnes before 2011, Stainer said in an interview with Reuters TV.

“We think (2010) should be a transitional year but we should be back to normality in 2011,” he said.

Asked about forms of cooperation with its largest shareholder EuroChem, backed by Russian investor Andrei Melnichenko, Steiner said options were limited.

EuroChem, which has so far focused on nitrogen and phosphate fertilisers, last year auctioned one of three licences to exploit the world’s second-largest potash deposit, below Russia’s Ural mountain range.

“They have a mine in preparation ready for production in 2013 or later and there they want to be on their own,” Stainer said, adding that collaboration would have to benefit both sides.

K+S, which traces its roots to a late-19th-century salt mine, said it still expected a significant decline in sales and now saw a sharp decline in earnings this year.

K+S shares change hands for 13 times estimated earnings for the coming 12 months, according to Thomson Reuters StarMine, which weights estimates according to analysts’ track record.

That is roughly in line with multiples for Potash Corp of Saskatchewan and Mosaic.

Reporting by Ludwig Burger; Editing by Richard Hubbard

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