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Higher prices, production to boost K+S FY'19 earnings

K+S AG expects a significant increase in its 2019 EBITDA to between €700 million and €850 million, from €606 million in 2018, driven by higher fertilizer prices, a jump in potash output after a severe drought in Germany halted production at its Werra plant, and the continued ramp-up of its Bethune potash plant in Saskatchewan.

The group's 2018 EBITDA improved 5% from €577 million in 2017, while revenue rose 11% on a yearly basis to €4.0 billion due to larger sales volumes and higher prices for potassium and magnesium products, partially offset by the weather-related problems.

During the fourth quarter of 2018, EBITDA jumped 22% to €228 million, and revenues increased 18% to €1.2 billion.

The company said March 14 that it produced 1.4 million tonnes of potassium chloride at Bethune, reaching its output target for 2018.

Despite closing its Sigmundshall site in Germany, K+S expects potash production to grow in 2019 compared to 2018.

The company seeks to reach positive free cash flow in 2019, which it has not done since 2013. It also plans to generate more than €150 million in synergies annually from the end of 2020 onward.

Given this positive view, the group's board intends to propose a dividend of 25 cents per share for 2019, compared to 35 cents per share in 2018, representing a payout ratio of 56%, from 46% previously.