ROUNDUP 2: K + S balance sheet remains in focus – Group optimistic for 2022

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(new: indications for 2022 in the first and penultimate paragraph, details on the plans for the remaining salt business in the seventh paragraph)

KASSEL (dpa-AFX) – The fertilizer group K + S cannot dispel the doubts of the financial supervisory authority Bafin about the amount of a billion dollar depreciation in 2020. The examination of the case by the German Audit Office for Accounting (DPR) continues, as K + S announced on Thursday in Kassel. That in the MDax The listed company rejects the allegations as unfounded, also including an analysis by external auditors. Meanwhile, in day-to-day business, the people of Hessen benefit from high fertilizer prices. In the coming year, an operating profit (Ebitda) of one billion euros could be achieved, said K + S boss Burkhard Lohr at a capital market day. In addition, profitability is to be increased in the medium term. Nevertheless, the share would come under significant pressure.

In future, the shareholders are to participate in this with a basic dividend of 15 cents per share. There should be surcharges for years with a correspondingly good development. For comparison: no dividend was paid for the past financial year and only 4 cents for 2019.

The comments on the dividend are likely to please investors, but the medium-term goals appeared to be quite ambitious overall, said analyst Markus Mayer from Baader Bank in an initial assessment. In the past, K + S failed to meet medium-term targets. The company must therefore deliver before the market believes in the goals.

In an extremely positive market environment, the group achieved an operating profit margin (Ebitda margin) of 16.2 percent in the third quarter, and 16.7 percent for the first nine months. So there is still a long way to go up to the target of more than 20 percent over the cycle.

In absolute figures, the group increased sales from July to the end of September by around a third year-on-year to 746 million euros, and operating profit soared by half to almost 121 million euros. The booming agricultural markets provided tailwind. In the face of high crop prices, farmers are willing to spend more on fertilizer. In addition, municipalities are already preparing for a possibly harsh winter. Sales of de-icing salt were recently above average.

Against this background, boss Lohr is now calculating an operating profit of around 630 million euros for the year as a whole. A previously expected contribution of 200 million euros from the establishment of the Reks joint venture by K + S and the Remondis subsidiary Remex has not been included in the outlook since the end of October. The reason is a drawn-out review of the transaction by the cartel watchdogs.

Since the prospects for the agar market are also good for 2022, the operating result could even climb to one billion euros, according to Lohr. Here, too, a possible Reks contribution is excluded. In addition, K + S wants to achieve a clearly positive free inflow of funds in the coming year. Free cash flow should be balanced in 2021. With a view to the recent sharp rise in energy prices, Lohr said that K + S had secured two thirds of its gas requirements for the next three years before the latest price jump.

The bottom line is that K + S earned just under 1.3 billion euros in continued business in the third quarter of the year, after a loss of almost 1.8 billion euros a year ago. However, this indicator has been less meaningful for some time, as K + S adjusts the estimated value of its own production facilities much more frequently than before to the expected market and business development. If the area around the fertilizer brightens up, the value increases accordingly ./mis/zb/eas/tav/he


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