I think KLL fans should rather think about the financial situation of K+S. The share price has plummeted by 50% in three years and the company is massively indebted. The fundamental problem with K+S is the lack of growth. Revenues fluctuate from year to year, an upward trend is not discernible with the best will in the world.Margins are low and, more generally, declining. Profits have fallen almost every year since 2012 and a positive cash flow has not been achieved since 2013.As a result, debts have literally exploded in recent years. At last count, the company had 3.03 billion euros in net debt. Interest is now consuming a large part of the funds generated.The calculation is relatively simple. The turnover is close to 4.0 billion euros and the operating margin is only a few percent.This is offset by debts of more than 3.0 billion euros, which also cost a few percent interest. Not much can be left over.The question must be asked whether K+S will be able to earn the cost of capital at all in the future. In a situation like this, a company can quickly find itself in difficulties: For years, global production capacities for potash fertilizers have exceeded demand. This exerts enormous pressure on prices and accordingly, there has been a great deal of effort in the industry to reduce costs. K+S has slept through this, the plants are outdated.But even if the price of potash rises for a certain period of time, K+S will not be able to take advantage of this. From 2017 to 2018, the price of potash fertilizer rose by just under 50%, but net income was nevertheless down.Since then, the price and demand for potash have been falling again.In summary, we are thus dealing with the most expensive producer of a raw material. This raw material is possibly facing a downturn lasting several years. The reasons for the lack of competitiveness are structural and cannot be remedied.At the same time, one is heavily indebted and does not earn any money anyway.In 2021, EUR 835 million will have to be refinanced, which should further increase the interest burden.This makes it all the more difficult to make a profit.The Board of Management has also recognised this and has adopted a "package of measures to generate value quickly and reduce debt". It has come to the point where parts of the company have to be sold to prevent the situation from escalating.This should avert insolvency, but it shows what problems the Group faces. In the long term, only one thing helps: profitability must improve significantly.
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