March 12, 2015 / 10:37 AM / 2 years ago

UPDATE 2-Potash group K+S bumps up dividend on prospects for profit boost

* Sees significant gains in operating profit, net income

* Bolstered by higher fertiliser prices, dollar, cost cuts

* Tops up dividend to 0.90 eur/shr, ends payout austerity

* Shares rise more than 5 pct (Adds analyst comment, releads on dividend)

By Ludwig Burger

FRANKFURT, March 12 (Reuters) - German potash miner K+S raised its dividend for 2014 after a rebound in prices of the fertiliser ingredient brightened the outlook for the company's earnings this year, sending its shares higher.

K+S said it would pay a dividend of 0.90 euros ($0.96) per share for 2014, up from 0.25 euros a year earlier and exceeding a market forecasts of 0.64 euros.

This marks a return to a policy of paying shareholders 40 to 50 percent of adjusted earnings. A year ago, K+S had to cut its 2013 dividend and suspend its long-term payout goal to conserve cash partly due to a slump in potash prices.

The potash market was thrown into turmoil in 2013 when Russian producer Uralkali quit a powerful sales alliance with Belarus' Belaruskali, leading to higher output volumes and lower prices. But the market began to stabilise last year.

The company, formerly part of BASF, said higher potash prices, a strong U.S. dollar, which would boost the value of overseas sales, plus cost cuts would produce gains in both 2015 operating profit and adjusted net income.

K+S shares were 4.9 percent higher by 0915 GMT, while Germany's blue-chip index DAX was little changed.

Baader Bank analyst Markus Mayer said the miner's outlook was "surprisingly positive." Baader Bank currently has a "sell" recommendation on K+S.

Citi analyst Andrew Benson said: "We expect some upgrades (of analysts' earnings estimates) on the back of this guidance," Citi has a "sell" recommendation.

The recovery in the market for potash, a crop nutrient that helps plants grow and resist cold and drought, is partly due to flood damage in November at one of Uralkali's mines, which could dent output considerably.

The Russian miner's 2015 production may fall 16 percent to 10.2 million tonnes if the mine is shut off permanently.

The average per-tonne price of K+S's potash products in the fourth quarter was 291.2 euros, 7.6 percent above the year-earlier level and also up from the third quarter, the group's financial report showed.

The group's fourth-quarter earnings before interest and tax, adjusted for the effect of currency hedging (EBIT I), rose 31 percent to 130 million euros ($137.71 million), in line with the average estimate in a Reuters poll of analysts. ($1 = 0.9440 euros) (Reporting by Ludwig Burger; Editing by Maria Sheahan and Jane Merriman)

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