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
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
"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.
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 close 1.9%
higher at E36.73 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
The performance was in line with market expectations.