Linked In
News In
Linked In

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

K+S warns on lower potash values - as India seals cut-price purchase

Twitter Linkedin eCard

K+S shares plunged 14% after the fertilizer group revealed a plunge in profits blamed largely on weak potash values – even as Belarus revealed it had sold the nutrient to India at the lowest price in a decade.

German-based K+S, the European Union's largest potash group, revealed its operating profits for the April-to-June quarter had plunged by 94% - to E10m, from E179.2m a year before.

While K+S has warned previously that operating profits should, over 2016, "fall significantly below" last year's levels, the extent of the decline in the second quarter stunned investors.

The group's shares plunged 13.7% in early deals in Frankfurt to E18.245, wiping more than $600m from K+S's stockmarket value.

The shares recovered a little ground in afternoon deals to stand at E18.50, a drop of 12.5% on the day – still far outpacing the 2.8% decline in the average Frankfurt share, as measured by the Dax index, on a weak day for world equities amid the fallout from the UK's vote to leave the EU.

The stock price also represented less than half the E41 a share that PotashCorp offered last year in a takeover approach which the Germany group rejected as too low, saying that it "does not at all reflect the fundamental value of K+S".

'Significantly lower selling price'

The group said that the scale of its quarterly profits drop reflected in part weak forward orders in North America for deicing salt, and "unexpectedly high" production outages in German potash due to limits on the permitted levels of waste water it can dispose of.

However, Norbert Steiner, the K+S chief executive, also highlighted a "significantly lower average selling price" of potash, which have continued to be undermined by the failure of China, the top importer, and second ranked India to sign new purchase deals.

In fact, separately on Monday, Belarusian Potash Company, the Belarus potash export group, revealed a long-awaited sales agreement with India's Indian Potash Limited (IPL), for 700,000 tonnes of the nutrient.

However, the price, at $227 a tonne on a cost and freight basis, represented a 32% drop from the $332 a tonne at which BPC agreed to sell potash to India last year.

'Boost demand'

"The price of the contract is fair and reflects current market conditions of the global potash market," BPC said.

Also on Monday, Credit Suisse pegged potash prices as measured in South East Asia at $230 a tonne, down $5 a tonne week on week, and down by 21% so far this year.

Brazilian values at $215 a tonne – a drop of $10 on the week and 22% for 2016.

However, BPC said that the agreement with IPL would catalyse a recovery in demand from other buyers, many of which have been awaiting an Indian deal, seen as a setting a benchmark for prices worldwide.

"The conclusion of an agreement with IPL will undoubtedly be one of the main drivers for the industry's development," BPC said.

"It will positively affect the global potash market in the near future, add more certainty to all stakeholders and boost demand for potash fertilizers."

By Mike Verdin

Twitter Linkedin eCard
Related Stories

Will protein prices fight back against fat in dairy markets?

Prices of fats remain elevated against protein values in dairy - at a time when the opposite is true in markets for oilseed products

World phosphate, potash shipments to grow in 2018, helped by Chinese needs

Mosaic forecasts further demand expansion, as it heralds a "transformational year" for its own fortunes, after a 2017 marred by a one-time tax charge

Deere lifts sales hopes - even as it unveils biggest loss in 25 years

The maker of John Deere tractors flags "strengthening" market conditions, but swallows a huge writedown prompted by US tax retorms

Plant Impact agrees takeover by Croda, after failure of Bayer contract

The crop enhancement group, floored by the failure of a supply deal with Bayer, agrees a takeover by a maker of chemicals from anti-wrinkle creams to floor coatings
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069