March 11, 2020 / 1:20 PM / in 21 days

K+S puts Americas salt business on auction block to slash debt

FRANKFURT (Reuters) - German minerals firm K+S (SDFGn.DE) said on Wednesday it would sell its salt business in North and South America to slash its debt pile and focus on potash fertilizer products.

“It is the best option to achieve the urgently required reduction of the company’s debt,” Chief Executive Officer Burkhard Lohr said in a statement.

The planned sale of the salt unit - which is the world’s largest salt supplier and owner of the Morton Salt brand - would allow the company to reduce its net debt by more than 2 billion euros ($2.3 billion), when combined with major restructuring measures, the company said.

Yet to be specified job cuts would mainly affect the group’s headquarters in Kassel, Germany, a spokesman added.

K+S shares were up 17% to 6.83 euros at 1440 GMT, after losing more than 60% in value over the past six month. That compares with a decline of about 30% by larger Canadian rival Nutrien (NTR.TO) over the period.

The plan marks a change from proposals laid out in December to look into options for the salt business in the Americas, which accounts for more than one third of group sales, with a preference for a stake sale which could be done via an initial public offering. [L8N28K50G]

Deliberations to sell a stake in its Bethune potash mine in Canada, also unveiled in December, are no longer on the agenda, the company said.

The group’s net debt, which stood at 3.1 billion euros or 4.9 times core earnings (EBITDA) at the end of 2019, stems mainly from the 3 billion euros it spent on building the Bethune mine, formerly known as the Legacy project and based on a mining license it acquired in 2010.

But potash prices fell short of expectations and K+S also grappled with product quality issues at Bethune.

As a result, rating agency Standard & Poor’s has a “BB-“ rating on the company’s debt, three notches below investment grade.

K+S added it expected 2020 earnings before interest, taxes, depreciation and amortization (EBITDA) of 500-620 million euros, down from 640 million in 2019, as lower prices for farming fertilisers will temper larger sales volumes and amid weak demand for de-icing salt.

EBITDA rose 6% last year, on flat sales of just over 4 billion euros.

K+S had to slash production in 2019 in response to weak demand for potash, following the lead of rivals such as Nutrien.

K+S in 2015 fended off a 7.9 billion euro takeover approach from Nutrien, at the time called Potash Corp of Saskatchewan, of 41 euros per share.

Additional reporting by Arno Schuetze, editing by Thomas Escritt and Mark Potter

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