Business Segments of the K+S Group

Salt Business Segment

Variance analysis in %	Q2/08	H1/08
Change in revenues	+ 9.5	+ 1.1
- volume/structure	+ 10.9	+ 2.8
- prices	+ 1.3	+ 2.9
- exchange rates	(2.5)	(4.6)
- consolidation	–	–
Food grade salt	(3.9)	+ 1.3
Industrial salt	+ 7.6	+ 3.2
Salt for chemical use	(5.8)	(6.4)
De-icing salt	(19.2)	(10.9)
Other	+ 82.6	+ 47.1

€ million	Q2/08	Q2/07	%	H1/08	H1/07	%
Revenues	108.0	98.6	+ 9.5	278.3	275.2	+ 1.1
Earnings before interest, taxes, depreciation & amortisation (EBITDA)	3.5	8.9	(60.7)	25.5	40.8	(37.5)
Operating earnings (EBIT I)	(4.2)	1.7	–	10.5	26.7	(60.7)
Capital expenditure	29.8	4.9	508.2	35.3	10.4	+ 239.4
Employees as of 30 June (number)	–	–	–	2,347	2,282	+ 2.8

 

Market environment

During the second quarter, high stocks held by customers on the Western European de-icing salt market put pressure on prices. In the North American de-icing salt market, the tenders for the coming winter season have just started. While the trend toward a low-salt diet slightly weakened demand in the food grade salt segment, demand on the industrial salt market increased further. The high demand for salt for chemical use continued, however, it was not possible to completely pass the higher energy costs of production onto customers.

Revenues by product group
Jan. – June 2008
(in %)

Revenues

During the second quarter, at € 108.0 million, revenues of this business segment were just under 10 % lower than during the same period last year; negative currency effects were more than made up for by increases in revenues of the logistics company Empremar. The revenues for food grade salt fell by 4 % to € 23.3 million due to volume and currency factors. In the industrial salt segment volume-related increases in revenues in Europe were able to more than make up for moderate currency-related declines in revenues overseas; at € 41.3 million, revenues were almost 8 % higher than during the same period last year. While in the case of salts for chemical use revenues declined by € 0.8 million to € 13.1 million due to currency factors, revenues for de-icing salt fell by 19 % due to volume and currency factors. The 83 % increase in revenues in the “Other” segment to € 22.5 million was chiefly the result of increases in revenues at Empremar on account of volume factors. During the first six months, at € 278.3 million, total revenues of the business segment were unchanged compared with the same period last year.

Development of earnings

At € (4.2) million, operating earnings in the second quarter were down € 5.9 million on the same period last year. While a slight increase in earnings was achieved at esco, the SPL result was impacted by a lower currency result. Moreover, higher costs, in particular for energy and freight, had a negative impact on earnings. During the first six months of 2008, EBIT I at € 10.5 million was significantly down on the same period last year.

Outlook

Despite a slow start for de-icing salt due to weather conditions, we anticipate a moderate increase in revenues during the year as a whole. The cost side will be impacted this year by higher energy and freight costs as well as a lower currency result. Operating earnings should therefore be significantly lower.