K+S Forecasts Decline in Operating Profit for 2024 – Market Stabilization Expected

The German fertilizer producer K+S is preparing for a decreased operating profit in 2024, but sees signs of market stabilization, as announced with its current financial figures. CEO Burkhard Lohr anticipates a balance between supply and demand for 2024, despite the potential increase in shipments from potassium producers in Russia and Belarus. This outlook has helped the MDax-listed company’s stock price to a significant rally. After a year in which K+S initially benefited from high potassium prices, which then rapidly declined in a weaker agricultural market environment, Lohr had to adjust the annual targets. The revenue losses mainly affected the farming segment, while sales in the industrial sector only fell slightly. The decline in revenue from potassium-containing industrial products was partly offset by higher prices for salt products. Ultimately, K+S reported a revenue decline of nearly one-third to approximately 3.9 billion euros, achieving an EBITDA of 712 million euros, thereby surpassing average analyst expectations. The adjusted surplus decreased from nearly 1.5 billion euros in the previous year to 162 million euros in 2023. For the fiscal year 2024, an operating result between 500 and 650 million euros is expected, with the lower end of estimates based on stable potassium prices overseas and a price decline in Europe, and the upper end based on price increases in the spring season and continuing good prices in Europe. Energy and logistics costs could provide additional relief and are expected to be about 100 million euros lower. JPMorgan analyst Chetan Udeshi views the earnings forecast positively and considers the lower end of the forecast higher than the cyclical low many investors expected. Investors seem to like the outlook, as the company's shares continued their recovery and rose by about 9 percent during trading. K+S faces challenging tasks with expected high investments of approximately 550 million euros for the coming year. These will flow particularly into the "Werra 2060" project to extend the operating life of the Werra plant and into the production of specialty products with higher profit margins. For investors, this means a dividend of 0.70 euros per share for 2023 – a decrease compared to the previous year. With an eye on free cash flow, which should be at least balanced after falling last year, Baader Bank analyst Konstantin Wiechert suggests there may be a "zero-round" for the dividend next year.