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K+S cuts outlook after dry weather weighs on production

15th November 2018

By: Reuters

  

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FRANKFURT – German potash miner K+S lowered its full-year earnings guidance on Thursday after a severe drought hampered production at its main mine network in the third quarter.

The company now forecasts earnings before interest, taxes, depreciation and amortisation (Ebitda) between €570-million and €630-million, compared with previous forecast of €660-million to €740-million.

K+S was forced to shut down its Wintershall site at the end of August and also halted output at is Hattorf mine in September, as exceptionally low water levels in the Werra river restricted its ability to dispose of waste water, dragging down earnings by €80-million.

The output at its Werra mine network was back at full capacity on October 1.

K+S said quarterly Ebitda fell to €36-million on increased sales of €840-million. The company swung to a net loss of €61-million, in line with analysts' expectations.

"The extreme drought and higher logistics costs have restricted our growth potential in the third quarter," CEO Burkhard Lohr said in a statement.

In its salt business, K+S now expects Ebitda to decline moderately this year, while it is targeting higher earnings in its potash and magnesium business.

Shares in K+S fell 2.5% to the bottom of the MDAX index in pre-market trade at brokerage Lang & Schwarz.

K+S has been plagued in recent years by production stoppages at its Werra site in Germany due to waste water issues that have led to a lack of available staff and machinery.

Waste water discharge is stopped for environmental reasons when the river water runs low to keep salt concentration at acceptable levels.

As river levels have not yet normalised, K+S faces extra costs for transporting considerable amounts of waste water to offsite storage basins.

Canadian rival Nutrien, formed by the merger of Agrium Inc and Potash Corp of Saskatchewan in January, raised its full-year adjusted profit forecast last week, driven by strong demand for its potash fertilizers.

Nutrien said its potash volumes rose 17% to 3.9-million tonnes at an average realised price of $212t in the third quarter.

K+S said that in its potash and magnesium business, revenues rose by 18%, with 7.8 percentage points of that coming from price increases.

Edited by Reuters

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