The last of its kind in Europe

Figures are but a transient shadow, if one understands that potash is crucial for the production of food and feed. Supply will be an issue in 2022 and 2023 after the ban of Belarus and Russian sources from the European market. As customers are buying what they can get, prices will see no relief in the coming quarters. The reported figures were a mixed bag: a 7% miss at the top line and +4% EBITDA ahead consensus.

A shiny future …

… against the background of a European war. The really worrying unanswered question is: could hunger come back to Europe? k+s’s management is concerned about the negative impact from less availability of ammonia in Europe, the consequences on fertiliser production as well as the high prices in the commodities it uses. Nevertheless, management anticipates a good near-term future with good demand and quite well hedged energy prices. A complete cut-off of Germany from Russian gas supply is a ma

Finally a good ending?

Despite the company’s inconsistent communication and the ongoing FREP proceedings, the high impairment was fully reversed which sent positive shockwaves through the P&L and the balance sheet compared to a year ago. Based on the positive price developments, management lifted its guidance once again and indicated a strong 2022, excluding the REKs-related one-off. Q3 figures were a notch weaker than expected, the same was true for consensus.

REKS might be delayed

The higher EBITDA guidance excluding the REKS joint venture fully fits into our view. The ongoing review of the anti-trust authorities guides for something really meaningful, otherwise the officials would not invest so much effort in reviewing the potential joint venture.

Out of the rain

k+s reported a good set of figures in addition to the released preliminary figures (EBITDA). The street underestimated the jump in profitability (top line: +1.9%; EBITDA: +20.0%). The figures fit into our broad picture. The higher sales prices seem to be lasting longer than previously expected and, as availability and delivery have become more important on a purchaser’s agenda, k+s should see a higher profitability in 2021. Due to the absorption of the divestment proceeds, some metrics came in

Bad weather makes for a good start

k+s reported a good set of figures, which were positively impacted by the amount of the reversal of the impairment (€180m) taken in Q3 20 due to the lower than expected potash prices. Adjusted for this effect, profitability still looks promising. But we believe, the share is currently more a ‘delivering to targets’ play than a ‘profitability momentum’ one. Due the reversal, our expectations were beaten. The same is true for consensus.

A bit perplexing, but finally not too bad

k+s reported a rather confusing set of figures, as management seems to have forgotten to prepare a condensed set of figures. Furthermore, it presented a mix of Q3 19 and Q4 20 figures. Due to the lack of available information, it is not easy to analyse the figures. It looks as if the figures of k+s’s continuing operations were below our expectations and did not meet the company’s own guidance.

Some overshooting in Q3

After all the postponements and disappointments, expectations were not high, so k+s’s figures were a positive surprise beating our expectations at the profitability line as well as consensus. As a positive one-off effect was partly responsible, management confirmed the latest guidance, which includes restructuring expenses. Earmarked for divestment, the Americas division was not reported as a discontinued operation, but will be in the annual report.

A big strategic move

The divestment of the Americas division is not yet closed, but we see quite a high likelihood that it will be. This will help k+s to reduce debt, but leaves a more strategic question unanswered: what comes next? Once the restructuring has been finalised, it will be interesting to see where FCF really comes from. All in all, we appreciate the move, but expect to hear further details about the strategic plan.

Stay-at-home's positive effects did not help everywhere

Lockdowns do not always have to be something negative, by definition, as one could start a private cooking career or the beginning of the home swimming pool season could be moved forward, especially in the Americas. The Consumer segment could offset much of the negativity in k+s’s Q2 report. However, the agro business suffered from lower ASP in all reported regions. Profitability in Europe+ nearly halved. The reported figures were slightly below our expectations, but street expectations were m

Guidance lowered to lower end

k+s reported preliminary figures, which suffered severely from the mild winter and lower potash prices. We expected this. To our very reserved 2020 scenario also fits the low level of the new MOP (potassium chloride) contracts in China, which has an impact on the expected recovery of the ASP beyond China. In the light of recent developments, management recently lowered its FY guidance.

Putting the 'Americas' on the block

It had been clearly stated that the American salt business was in management’s focus and the likelihood for divesting parts of the division clearly rose. Now it has been made official for the sale of the whole division and signing is expected to take place in 2020. We believe, the main trigger for doing so, was the strong need to reduce financial debt. Reported FY figures were mixed, but do not fully match our expectations, especially on net profit.

Flurry of activity

Having removed the head of IR, k+s’s management has decided to make its communications to the capital markets known through a reputable newspaper. And there was really something to tell: it is striving hard to reduce debt quickly but the current business/pricing environment is unhelpful. It is on management’s agenda and a necessity, which is in their hands, as the operating performance is determined by many other factors (e.g. pricing). It is a sign: k+s is still alive.

Another profit warning

We understand k+s manoeuvres in an environment which can be impacted by many triggers, and we see the announcement of maintenance standstills cutting down volumes by another ~200kt as early scheduled stoppages. Compared to the previous year’s drought-related negative effects, this item might have been a bit more foreseeable. The most recent profit warning has not been perfectly managed, in our opinion. The reported Q3 figures gave a mixed pattern of met and missed expectations, which was true f

Strong Europe cushions America

K+S’s Q2 figures were more than solid and it looks to us as if management has made strong efforts to deliver the FY guidance, backed by some better weather conditions. The reported figures were broadly in line with our expectations (profitability was a notch below) and the consensus profitability expectations were missed by nearly -5%. The recent approval of the temporary storage of saline waste water provides additional planning security. Management has narrowed the guided range.

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