May 11, 2010 / 11:18 AM / 7 years ago

UPDATE 3-K+S raises volume forecast after solid Q1 results

* Q1 EBIT I 268 million euros, vs 244 mln Reuters poll

* Raises yr sales view to 6.5 mln tonnes of potash products

* Ups 2010 industry sales estimate but remains below peers’

* Keeps full-year profit, sales outlook vague

* Shares flat, outperforming materials gauge

(Adds analyst comment, CEO comment, more background)

By Andreas Kroener and Ludwig Burger

KASSEL/FRANKFURT, May 11 (Reuters) - German potash miner K+S’s SDFG.DE 2010 sales volume outlook remained behind those of its main rivals even as resurgent fertiliser demand helped it post forecast-beating first quarter results.

Chief Executive Norbert Steiner, known for being more conservative than his industry peers, said on Tuesday the group should sell slightly more than 6.5 million tonnes of potash products this year, up from previous guidance of just under 6 million tonnes.

The world’s fourth-largest potash supplier now sees global industry sales of the plant nutrient reaching 45 million to 50 million tonnes, compared with a previous estimate of just 45 million.

Potash Corp (POT.TO), the world’s largest fertiliser producer, reiterated last month it expected global potash shipments of about 50 million tonnes in 2010, an assessment that was echoed by Russian rival Uralkali (URKA.MM). [ID:nN29200817]

Canadian rival Mosaic Co (MOS.N) has said that global potash shipments would reach 47 million to 50 million tonnes this year. [ID:nWNAB5394]

K+S said its first-quarter operating profit excluding currency hedges (EBIT I) jumped by more than 50 percent to 268 million euros ($360 million), exceeding the average estimate of 244 million euros in a Reuters poll. [ID:nLDE6450MY]

The industry is banking on pent-up demand from farmers who last year held back on potash use, speculating on a decline in fertiliser costs while suffering from low grain prices.

Demand for potash tracked the boom and bust of financial markets over the last two years as investors rushed into and later abandoned agricultural commodities.

GENUINE SUBSTANCE

“As a raw materials company, our strategy is not directed towards the pursuit of short-term profit, but towards genuine substance,” CEO Steiner told shareholders at the annual meeting, delivering his speech in a confident tone.

He said some production cutbacks were likely in the second half and he expected significantly lower average selling prices for the year.

Steiner, who became CEO in July 2007, started out as a customs lawyer at K+S’s former parent BASF BASF.DE. He turned K+S, which traces its roots to a late 19th century salt mine, into the world’s biggest salt company by buying Morton Salt last year.

Potash stays in the soil longer than other fertilisers such as nitrogen, allowing farmers to delay using it if they think prices will fall, a tactic that intensifies swings in demand.

K+S stuck to its 2010 outlook for sales and earnings to rise significantly from last year, when operating profit hit a five-year low. It declined to be more specific but said it expected to pay a higher full-year dividend.

K+S shares came off session lows to trade nearly flat at 42.18 euros by 1045 GMT amid uncertainty over potash prices. Still, they outperformed the 3.6 percent decline in the STOXX Europe 600 Basic Materials index .SXPP.

“The trade-off between volume and price was much better than assumed and has driven the earnings up. However, there was no sign of any further price increases at potash,” said UniCredit analyst Andreas Heine, whose K+S earnings estimates have been the most accurate, according to Thomson Reuters StarMine.

K+S had said in March -- just before the start of the fertilising season in its key European market -- that demand from wholesalers continued to revive even after a price hike, marking a turning point after months of declines. [ID:nLDE62N0IJ] ($1=.7453 Euro) (Editing by Karen Foster)

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