Company: K+S
ISIN DE000KSAG888 | WKN KSAG88
Business: A German commodities company that are mining and processing raw materials. The group is divided into the two segments Potash & Magnesium (that is being used as standard and speciality fertilizers for enhancing the agricultural harvests) and Salt (de-icing, purified salt that are used for instance as table salt etc.). Lately their best business has been salt.
Active: Main focus in Europe and North America. Minor presence in South America and Asia.
The P/E of K+S is far too high with 23.9 but the P/B is excellent with 1.1, still Graham gives this an overall no go due to the high P/E. The earnings to sales are still low with only 5% and the ROE is appalling with 4.4%. The book to debt ratio is so, so with 0.7.
In the last five years they have had a yearly negative revenue growth rate of -1.7% which is awful and this gives us a motivated P/E of around 10 which means that K+S is over valued by the market today. They are focusing slightly more on R&D which I find very good because they are now up at 9% of their earnings going towards that. They are aspiring to focus more on the end consumer which companies always seem to do when they intend to push up their margins.
They pay a silly dividends of 1.5% which only corresponds to 36% of their earnings so they could push that up higher but it is clear that the new management wants space to manoeuvre.
Conclusion: Graham says no and so do I. K+S must now really show that they can increase their margins and that their new mine in Canada are making some nice money to us shareholders before there is any interest in stepping into it. Only good indicator is the P/B value and the rest of them look dreadful. I will remain as a shareholder.
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