K+S: bottoming out?
Update Q3 numbers 2024
Short description
The German company K+S manufactures potassium and salt, which explains the name Kali + Salz.
The Werra mine in Germany and the Bethune mine in Canada are the two main locations for extracting these raw materials. Additionally, there are other salt mines; salt is partly mined and partly extracted from saltwater.
The products from these mining activities, whether produced by K+S itself or by their customers, are used in chemicals, industry, food processing, animal feed, pharmaceuticals, water treatment, and de-icing salt.
However, our focus remains on the fertilizers they produce from potassium and salt. Potassium, along with nitrogen and phosphorus, is an essential component for plants. Potassium makes plants more resistant to extreme weather conditions and increases the efficiency of crops' water use.
In addition to the usual fertilizers, very specific applications have also been developed to meet particular needs, including those of organic farming.
Why we selected K+S
We selected K+S because it is very cheap at 0.3x tangible book value and we are near the bottom of the cycle, although unfortunately, we do not know how long this will last.
However, there are also some long-term arguments for the entire sector. There is increasingly less agricultural land available while the number of people to be fed is rising. Therefore, production per hectare must be increased, which means a greater demand for fertilizers.
Additionally, their products are used for water treatment. While water is abundant, potable water is scarce.
Plants also need to become more resistant, and potassium plays a crucial role in increasing resistance.
Currently, the demand for potassium is higher than the supply and there is only one project that will add significant capacity in the near future. The Jansen project from BHP.