Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
German potash miner K+S has decided to cut its 2013 dividend payment by 82% compared with the previous year – a result of a turbulent year in the potash market.
The company’s Board of Directors proposed the reduced dividend of 0.25 euros per share at the Annual General Meeting this week. This represents a payout ratio of 11% – a deviation from the miner’s normal dividend payout ratio of between 40% and 50% of adjusted earnings after tax.
“The decision to deviate this year for the first time from the dividend policy pursued for many years was taken against the backdrop of the not yet overcome uncertainties in the market for potash and magnesium products as well as the considerable capital expenditure planned which will require substantial financial resources over the coming years to strengthen the company long-term,” the company wrote in a statement, adding that it will return to its previous dividend policy “as soon as possible.”
Though sales were relatively stable, the company’s earnings before interest and tax fell by 18% year-on-year to 656 million euros in 2013 – partly the result of weak potash prices.
The dividend cut should free up some cash for the company’s planned Legacy mine in Canada, through which the firm plans on reaching emerging markets in Asia and South America.
The mine will cost about $4.1 billion in the first two expansion phases and is expected to reach annual output capacity of 2 million tonnes by the end of 2017.
K+S is the world’s fifth-largest potash producer and Western Europe’s biggest supplier; it’s also the world’s biggest salt producer.
