K+S trims 2025 volume outlook but keeps profit guidance steady

Investing.com -- Kassel-based potash and salt producer K+S AG (ETR:SDFGn) on Tuesday narrowed its full-year 2025 earnings guidance but lowered its agricultural sales volume forecast as it shifts production toward higher-value sulfate of potash. 

Analysts at Morgan Stanley noted that the revised outlook leaves profit expectations largely unchanged after a stronger-than-expected third quarter.

K+S now guides to full-year 2025 EBITDA of €570 million to €630 million, compared with a prior range of €560 million to €640 million. 

The midpoint of €610 million remains unchanged and sits about 2% below consensus estimates of €611 million. 

The company reduced its agricultural sales volume target to about 7.4 million tonnes, down from 7.5 million to 7.7 million tonnes, reflecting reduced output to optimize the product mix. 

Morgan Stanley said the average agricultural selling price (Ag ASP) guidance remains steady at about €330 per tonne, similar to the first half of the year.

The brokerage noted that the implied fourth-quarter Ag ASP of €322 per tonne, compared with €337 per tonne in the third quarter, “appears overly bearish given the only modest moderation in (Brazil) MOP prices over the last two months.” 

The brokerage said it expects consensus forecasts for full-year EBITDA to remain largely unchanged.

The adjusted free cash flow (FCF) guidance for 2025 also remains described as “slightly positive.” 

Morgan Stanley said this appeared conservative against €62 million generated year-to-date, compared with consensus estimates of €39 million, though it cautioned that full-year capital expenditures could be back-end loaded, potentially limiting fourth-quarter cash generation. The company maintained its full-year capital expenditure outlook of around €550 million.

In the third quarter, K+S reported EBITDA of €110.7 million, 9% above consensus expectations of €102 million. Margins improved by 500 basis points year over year to 12.6%, supported by stronger Ag ASP and higher industrial volumes. 

Agricultural sales volumes reached 1.80 million tonnes, down 5% year over year and 4% below consensus at 1.88 million tonnes, mainly due to a 14% decline in specialty products linked to the mix shift. European agricultural volumes fell 5% year over year to 0.77 million tonnes.

The average Ag ASP was €342 per tonne, 2% higher than consensus and up €2.6 per tonne from the second quarter. Excluding traded goods, Ag ASP rose 9% year over year to €337 per tonne. 

Adjusted free cash flow for the quarter was €37.3 million, compared with €111 million a year earlier, supported by higher EBITDA and slightly lower capital expenditures of €135 million, offset by a smaller working capital inflow of €41 million, compared with €110 million in the same period last year. 

K+S ended the quarter with net cash of €13.4 million, reversing a €7.1 million net debt position from the previous quarter.

Morgan Stanley said a “small production loss” occurred at the company’s Bethune site in Canada after a brine tank leak on November 5 temporarily halted evaporation. 

Production resumed on November 8, and K+S stated the loss is expected to be recovered in December.