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K+S AG
Germany/Chemicals Analyser
K+S AG (Buy)
Buy
Recommendation unchanged
Share price: EUR
closing price as of 07/05/2012
Target price: EUR
Target Price unchanged
Reuters/Bloomberg
36.66
57.00
SDFG.DE/SDF GY
Market capitalisation (EURm) 7,017
Current N° of shares (m) 191
Free float 91%
Daily avg. no. trad. sh. 12 mth 1,370,760
Daily avg. trad. vol. 12 mth (m) 59
Price high 12 mth (EUR) 56.57
Price low 12 mth (EUR) 33.35
Abs. perf. 1 mth -4.37%
Abs. perf. 3 mth -9.70%
Abs. perf. 12 mth -31.04%
Key financials (EUR) 12/11 12/12e 12/13e
Sales (m) 5,151 5,106 5,325
EBITDA (m) 1,218 1,137 1,214
EBITDA margin 23.6% 22.3% 22.8%
EBIT (m) 976 896 961
EBIT margin 18.9% 17.5% 18.0%
Net Profit (adj.)(m) 674 607 651
ROCE 16.8% 14.2% 13.0%
Net debt/(cash) (m) (46) (148) 200
Net Debt/Equity 0.0 0.0 0.1
Debt/EBITDA 0.0 -0.1 0.2
Int. cover(EBITDA/Fin. int) 18.8 19.5 19.5
EV/Sales 1.4 1.5 1.5
EV/EBITDA 6.0 6.7 6.6
EV/EBITDA (adj.) 6.0 6.7 6.6
EV/EBIT 7.5 8.5 8.3
P/E (adj.) 9.9 11.6 10.8
P/BV 2.2 2.0 1.8
OpFCF yield 7.4% 10.2% 9.3%
Dividend yield 3.5% 3.7% 3.8%
EPS (adj.) 3.52 3.17 3.40
BVPS 16.10 17.97 20.03
DPS 1.30 1.35 1.40
60 vvdsvdvsdy
55
50
45
40
35
30
Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12
Source: Factset
Shareholders: EuroChem 9%;
Analyst(s):
K+S AG DAX30 (Rebased)
Michael Schaefer, Equinet Bank
michael.schaefer@equinet-ag.de
+49 69 58997 419
Preview Q1: Looking beyond expected weakness in Q1
The facts: K+S is due to report a widely expected decline in EBIT I in Q1 12e
tomorrow. We forecast an 11% above-consensus EBIT I of EUR 290m, declining
21% y-y compared to a record Q1 11 result of EUR 368m pushed by a strong deicing
salt business and accelerated P&M sales. 5yrs average- Q1 EBIT I at K+S
stand at EUR 226m, including the integration of Morton Salt since Q4 09.
K+S - Preview Q1 2012e results
EUR m Q1 12e Q1 11 y-y (%) 2012e 2011 y-y (%) Q1 12c
Sales 1,436 1,627 -12% 5,106 5,151 -1% 1,449
Adj. EBITDA 347 425 -18% 1,137 1,218 -7% 322
Margin (% of sales) 24.2% 26.1% 22.3% 23.6% 24.7%
EBIT I 290 368 -21% 896 976 -8% 262
Margin (% of sales) 20.2% 22.6% 17.5% 18.9% 18.1%
o/w P&M 205 202 1% 736 740 0% 184
o/w Salt 70 139 -50% 132 211 -37% 65
o/w Nitrogen Ferts 26 34 -22% 73 69 5% 23
Adj. Pre-tax profit 276 353 -22% 838 912 -8% 245
Adj. net income * 200 262 -23% 607 674 -10% 180
Adj. EPS (EUR) * 1.05 1.37 -23% 3.17 3.52 -10% 0.94
Our analysis: Non-winter and slow fertilizer start weigh on Q1 ... Estimated
41% y-y drop in de-icing sales volumes and P&M segment sales volumes
potentially coming in 13% below last year‟s level at 1.75m t may have sent EBIT I
down 21% y-y to EUR 290m in Q1 12e (c: EUR 262m). Adj. EPS mirrors operating
profit, declining 23% y-y to EUR 1.05 (c: EUR 0.94).
... but recovery in Q2 and bright outlook for Brazil ahead in P&M Segment:
However, we believe that postponed purchase in potash doesn‟t mean abandoned
for the entire season in the Northern Hemisphere. Hence, we forecast a rebound
in P&M segment sales volumes to 1.85m t in Q2 12e compared to 1.66m t in 2011
and 5yrs average of 1.71m t. Accumulated H1 12e volume of 3.6m t would still fall
slightly short previous year‟s level of 3.67m t, though. Furthermore, acceptance of
BPC‟s USD 30 / t price lift to USD 550 t MOP by Brazilian importers signals a) firm
demand in K+S‟s key offshore hub and b) upside to our overseas price
assumption of USD 510 / t in 2012e, we believe. This may result in above-average
Q3 12e P&M shipments, the hot season in Latin America.
Outlook to be confirmed: We expect K+S to confirm its March-guidance for
2012e, looking for a „moderate decline in Group EBIT I‟ at „stable‟ revenues. We
forecast EBIT I to decline 8% y-y to EUR 896m compared to EUR 976m in 2011.
EPS 12e may decline 10% y-y to EUR 3.17 compared to EUR 3.52 reported in the
previous year.
Conclusion & Action: The y-y decline in Q1 12e results is more than digested at
current share price levels, we believe. Hence, we rather look for a confirmation
that momentum in fertilizer sales volumes returned in Q2 12e and, unexpectedly
and not yet accounted for, prices, too. Early settlement of Chinese buyers for
Q2 12e-deliveries and acceptance of price lifts in Brazil are indicators for this.
Upcoming USDA crop outlook report for the 2012/13e marketing year on Thursday
may confirm continuing surge in demand from developing countries, absorbing
production expansion in the Northern Hemisphere. Hence, the macro and micro
framework for K+S looks promising to us. Confirm BUY. PT EUR 57.
Page 26 of 80 European Securities Network
Please refer to important disclaimer on the last page
Source: K+S, equinet (*excl. disc. Operations)