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RSS & PodcastsBusiness Segments of the K+S Group
Potash and Magnesium Products Business Segment
Demand for potash fertilizers in the second quarter remained exceptionally weak, also against the backdrop that agreements were yet to be concluded with India and China. While trade sector inventories continued to decline, producers report that they are reducing output once again to prevent their inventories from increasing further. In addition, during the course of June, it transpired that a price level of US$ 735 to US$ 750 per tonne of potassium chloride was unsustainable for larger volumes on important overseas markets. In view of this situation and the upcoming autumn fertilizing season, K+S accordingly introduced a reduction in the price per tonne of granulated potassium chloride in Europe, from the level of € 555 that applied since April to € 435.
In the second quarter, business segment revenues fell by 42 % or € 258.5 million to € 354.3 million. Decreases in sales volumes prompted by purchasing restraint as well as negative structural effects could only be partially offset by price and currency effects. In the case of potassium chloride, this resulted in a revenue decline of about 44 % to € 172.5 million and in the case of fertilizer specialities led to revenues that were down 54 % on the same period last year at € 106.9 million. Revenues could only be increased in the case of the industrial products segment, by 3 % to € 75.0 million, with higher prices more than offsetting the decrease in sales volumes. In the second quarter, volume amounted to 1.05 million tonnes (Q2/08: 2.02 million tonnes), yielding half-year volume of 1.95 million tonnes (H1/08: 4.13 million tonnes). In the first half of the year too, positive price effects could only partially offset decline in revenues prompted by volume and structural factors, with the result that revenues fell by 37 % to € 720.3 million.
Revenues by Product Group Jan. – June 2009
(in %)
Second quarter operating earnings reached € 53.8 million and were thus down € 237.6 million or 82 % on the level of a year ago. Lower freight and material costs compared with the previous year could only offset the effects of the steep decline in revenues attributable to volume factors to a very limited extent. An operating earnings contribution of € 150.8 million could be achieved for the first six months (H1/08: € 462.3 million).
In 2009, we expect the sales volume to decline to about 4.0 million tonnes of goods (2008: 7.0 million tonnes) as well as moderately declining average prices compared with the previous year. Consequently, revenues for the Potash and Magnesium Products business segment should be down by about one half of the very good figure for last year. Having made greater use of weak demand in the first half of the year for measures to ensure future production, we expect comparatively greater decrease in operating expenses in the second half of the year. By contrast, however, a weaker currency result should have a negative impact. While, from the perspective of the year as a whole, business segment total costs should therefore fall appreciably in relation to the previous year, however, there will be a sharp decline in operating earnings.
