Global sales of potash will near-double over the next two years, as fertilizer wholesalers restock and farmers replenish soils sapped of nutrients by low application rates last season, K+S said.

Sales volumes of the nutrient will jump by 50% to 45m tonnes this year, and to 55m tonnes in 2011, putting them nearly back at levels reached before the global economic downturn.

The rise reflected "low straight fertilizer stocks in the trade sector and… the lower potash content of the soil following two very good harvests and lower fertilisation since autumn of 2008", the German fertilizer giant said.

Farmers, faced with low crop prices and tight credit, scrimped on applications last year, prompting the worst slump in demand in a generation.

K+S had already detected some signs that demand for fertilizers was "normalising", Norbert Steiner, the  chief executive, said.

Group revival 

The revival would help the group's potash division raise sales volumes by 40% to 6m tonnes this year, although thanks to lower prices revenues would see only a "moderate" increase.

The nitrogen division would see a "tangible" rise in revenues.

The biggest growth would be seen in the K+S salt division, which has been swollen by the purchase of Morton Salt from Dow Chemical and strong demand from de-icing sale prompted by a harsh winter.

Dividend slashed 

The potash division saw operating profits slump 90% to E26.9m in the last three months of 2009 as a fall in average prices to E280.10 a tonne, their lowest in nearly two years, more than offset a revival in North American sales volumes.

Group earnings slumped by 93% to E15.6m for the quarter and by 90% to E96.4m for the year prompting the group to slash its dividend to E0.20 a share from E2.40.

K+S policy relates dividend payouts to underlying earnings.  

The group added that a "marked increase" in earnings expected for 2010 should have a "corresponding impact" on its next dividend.

'Litmus test'

The report was viewed by Credit Suisse analysts as containing "no major surprises", although they signalled it may still be too early to view a potash revival as in the bag.

"While the current momentum appears strong, the real litmus test will come towards the end of the second quarter when farmers have finished the spring fertilizing season and decide if potash prices are still low enough to apply second round fertilizing post the harvest," the bank said. 

K+S shares stood 1.7% lower at E46.155 in morning trade in Frankfurt.