K+S Group's 2013 operating earnings down 18.4% year-over-year to €655.9M, mainly due to lower average proceeds for potash fertilizers; revenues on level with 2012 revenues at €3.95B
March 13, 2014
“The year 2013 was associated with great challenges for the K+S Group”, stated Norbert Steiner, Chairman of the Board of Executive Directors of K+S, at the Company’s annual results press conference. “Nevertheless, K+S once again proved that the Company is able to cope with changes, both operationally and strategically, in order to secure long-term success”, Steiner went on to say. In this context, the Chairman of the Board of Executive Directors referred to the successful launch of the “Fit for the Future” cost-cutting and efficiency-enhancing programme as well as to further progress in the construction of the new potash plant in Canada.
In the second half of 2013, the potash and magnesium products business was impacted by the development after the statements by Russian Uralkali that it would expand its own capacities regardless of the price level. As a result, international prices for potassium chloride in particular came under pressure. In total, revenues of the K+S Group in the past financial year amounted to € 3,950.4 million and were therefore at the level of 2012 (€ 3,935.3 million).
In the Potash and Magnesium Products business unit, the trend in prices above all caused revenues to decline by 11%. Sales volumes remained stable at 6.94 million tonnes. Revenues in the Salt business unit rose by 18%. This was mainly attributable to the positive volume development in the de-icing salt business.
As expected, operating earnings significantly lower
Operating earnings EBIT I of the K+S Group decreased by 18.4% to € 655.9 million in 2013. The EBIT margin was 16.6% (2012: 20.4%). Operating earnings EBIT I in the Potash and Magnesium Products business unit decreased by about 28% to € 552.5 million, especially because of lower average proceeds for potash fertilizers. At € 117.8 million, operating earnings EBIT I of the Salt business unit in 2013 were up about 91% on the figure for the preceding year. This increase in earnings is primarily attributable to significantly higher revenues as a result of volume factors due to the above-average de-icing salt business in Europe.
Adjusted Group earnings declined
Adjusted Group earnings after taxes followed the trend in operating earnings and declined. This downtrend was intensified by the absence of a non-recurring effect resulting from discontinued operations in 2012, when the nitrogen business was still included. Therefore, the figure fell by 32% year on year to € 435 million. Adjusted earnings per share reached € 2.27 after having been € 3.33 in the same period last year.
“Fit for the Future” programme makes good progress
To make sustainable improvements in the cost and organisational structures, K+S launched the “Fit for the Future” programme last year. To enhance its competitiveness, the Company is seeking to cut costs by a total of € 500 million by 2016. K+S expects to reduce costs by a good € 150 million in 2014. Steiner: “The programme is making good progress. The first measures have already been implemented, the detailing of further initiatives is on schedule.”
Capital expenditure increased
In 2013, the K+S Group invested € 742.5 million, representing an increase of € 277.0 million or 60%. Of this, € 362.0 milllion was accounted for by the Legacy Project in Canada. The increase is also in part attributable to the implementation of the package of measures on water protection in the Hesse-Thuringia potash district.
2014 Outlook: Lower revenues and earnings expected
Following the conclusion of new contracts between major potash producers and China, prices appeared to bottom out at the start of 2014. With the sales volume for the Potash and Magnesium Products business unit expected to stay the same (2013: 6.94 million tonnes), average prices over the course of the year should be tangibly lower than in the preceding year. In the case of the salt business, K+S assumes that the volume of crystallised salt sales will amount to 22.8 million tonnes and will therefore be on about the same level as in 2013 while prices will also partly be lower.
Revenues of the K+S Group for financial year 2014 should therefore be moderately below the figure for the previous year. In particular, revenues in the Potash and Magnesium Products business unit should be tangibly down on account of the anticipated lower annual average prices.
Taking into account the high proportion of fixed costs customary in mining, it can be assumed that operating earnings EBIT I will be down significantly on the figure for the previous year.
Adjusted Group earnings after taxes should follow the trend in operating earnings and thus also be significantly lower than in the previous year.
(Further details regarding the outlook can be found in the Financial Report 2013 starting on page 113.)
Capital expenditure rising on schedule
According to the plan for 2014, capital expenditure will be increased tangibly to about € 1.2 billion. Outlays connected with the Legacy Project should account for about € 800 million of this figure. The construction of the new potash plant in Canada is proceeding according to schedule and K+S expects it to be commissioned in the summer of 2016. Part of the capital expenditure is also intended for the further implementation of the package of measures on water protection in the Hesse-Thuringia potash district.
Note to editors
The Financial Report 2013, the Corporate and Sustainability Report 2013 as well as the K+S Q4/13 Facts & Figures are available under www.k-plus-s.com/2013q4en on our website. Furthermore, a video message by Norbert Steiner, Chairman of the Board of Executive Directors, about the course of business and from 10 a.m., the speech by Norbert Steiner, Chairman of the Board of Executive Directors, and Dr. Burkhard Lohr, member of the Board of Executive Directors, for today’s K+S annual results press conference in Frankfurt am Main will be available there.
A conference call for analysts in English with Norbert Steiner and Dr. Burkhard Lohr will be held today at 1 p.m. also in Frankfurt am Main. Shareholders, investors, representatives of the press and all other interested parties are invited to follow the conference via a live webcast at (www.k-plus-s.com/de/audio-und-video/cc.html or by phone on +49-69-6677-75757; PIN 3564773#. The conference is being recorded and will also be available as a podcast.
K+S is an international commodities company. We have been mining and processing mineral raw materials for 125 years. The products we produce from them are used worldwide in agriculture, food and road safety and are important elements in numerous industrial processes. The nutrients potash and salt are accompanying the megatrend for the future: A constantly growing global population is becoming increasingly prosperous and striving for a more modern standard of living, which results in an increasing consumption of mineral raw materials. We serve the resulting growth in demand from production sites in Europe, North America and South America as well as through a global distribution network. K+S is the world’s largest salt producer and one of the top potash providers worldwide. With more than 14,000 employees, K+S achieved revenues in financial year 2013 of about € 4 billion and an EBIT of € 656 million. K+S is the commodities stock on the German DAX index. Learn more about K+S at www.k-plus-s.com.