May 8, 2020 / 8:31 AM / 20 days ago

Germany's K+S slashes dividend for possible request for state aid

FRANKFURT (Reuters) - Indebted German mineral miner K+S (SDFGn.DE) slashed its dividend proposal on Friday to become eligible for state aid, seeking to guard itself against any liquidity squeeze.

The dividend proposal for 2019 is now set at 4 euro cents per share, down from a previously proposed 15 cents per share, it said in a statement, adding it was eyeing loans backed by Germany’s development bank KfW [KFW.UL].

Reuters reported on Thursday that the salt and potash fertiliser supplier was preparing a potential application for state aid as the company grapples with a high debt load and fallout from the coronavirus pandemic.

The company had hoped to slash debt by more than 2 billion euros ($2.2 billion) by selling its salt activities in North and South America, which accounted for about a third of operating profit last year, but the coronavirus pandemic has all but halted global deal activity, throwing a timely deal into doubt.

K+S said it was on track to find a buyer before the end of 2020 for the salt business, the world’s largest salt supplier and owner of the Morton Salt brand. It also said it had started working on previously announced administrative cuts.

It said on Thursday efforts to minimise infection risk for staff and outages at smaller sites had reduced first-quarter earnings by 10 million euros but weak potash prices and heightened market uncertainty could put financing at risk.

“It cannot currently be ruled out that liquidity sourcing will be made significantly more difficult,” the company said.

“K+S is examining all options available to ensure financial flexibility and liquidity. A state-secured KfW loan is one of these options.”

People familiar with the matter said on Thursday that the group wanted to secure several hundred million euros in state-backed loans but Friday’s statement did not specify an amount.

First-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) fell to 201 million euros from 270 million a year earlier, K+S said. That surpassed an analyst consensus of 165.9 million euros posted on the group’s website.

It now predicts 2020 EBITDA of about 520 million euros, down from 640 million in 2019 and at the lower end of a previous guidance range of 500-620 million.

The shares were up 0.1% at 1005 GMT.

The company said it was banking on a recovery in global potash prices following a delayed bellwether deal between Belarus, one of the world’s largest producers, and major importer China worth $220 per tonne.

Reporting by Ludwig Burger; Editing by Michelle Martin and Edmund Blair

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