potash ind. sales to revive strongly in 2013

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Potash industry sales 'to revive strongly in 2013'
11:07 UK, 14th Mar 2013, by Agrimoney.com

The potash industry will enjoy a strong recovery in 2013, taking sales volumes to their second-best ever, thanks to the return of China and India to buying, K+S said, as it pleased investors by forecasting growth in its own profits.

The potash and salt group estimated world industry sales volumes of the nutrient this year at about 59m tonnes, an outcome which would place 2013 behind only 2011, when producers moved 60.2m tonnes.

The forecast reflected in part the boost to farm profitability from last year's high crop prices, which with US farmers finding yield losses made up by insurance.

'Greater use of fertilizers'

"The resultant income prospects for the agricultural sector should provide a sufficient incentive to raise yields through the greater use of fertilizers," said German-based K+S, the European Union's biggest potash group, with a share of some 10% of the world potash market .

The group also assumed "a significant increase in demand in China and India after the buying restraint in 2012".

Both countries have signed fresh potash supply deals in recent weeks after long delays blamed on disagreement over pricing.

China agreed to buy potash from North American and former Soviet Union producers at some $70 a tonne less than its previous contract.

Company prospects

The group placed some caution over the impact on its own performance of this market increase, forecasting that its own potash sales would reach "about 7m tonnes", in line with the 6.95mn tonnes achieved in 2013.

Sales would "at a lower average price", Norbert Steiner, the K+S chief executive, said.

However, the group cautioned over downbeat potash price forecasts, saying that "the economic viability of time consuming and very capital intensive new projects depends on a reasonable potash price level".

And new mines are needed, with "currently installed capacities" insufficient to meet demand rises required to support rising global food consumption, said K+S, which is developing a greenfield site in Canada to tackle its own capacity constraints.

Ahead of expectations

The group forecast that despite the potential for a potash revenue decline, its overall sales and operating profits would show "a slight increase" in 2013, lifted by a "tangible recovery" in its salt division.

"For 2013, we also see opportunities for a slight increase in revenues and earnings," Mr Steiner said.

The forecasts surprised analysts who had braced for declines in operating profits over the next two years, and helped K+S shares jump 3.6% to E37.35 in morning deals in Frankfurt, after earlier touching E37.58, their highest level since October.

For the fourth quarter of 2012, the group reported a drop of 12% to E182.3m in underlying operating profit, on sales down 7.8% at E941.6m, reflecting a late start to winter in North America which dented demand for salt.

The performance was in line with market expectations.