German potash and salt miner K+S Group reported better-than-expected results on Thursday, including EBIT (earnings before interest and taxes) above 217 million euros ($283 million). Investors need to look beyond the stable outlook for 2012 and see the positive forecast for 2013, Arnaud Scarpaci, fund manager at Agilis Gestion in Paris, told CNBC.com.
“This stock has a very strong potential,” Scarpaci said, “even if 2012 is stable, the fact that the outlook for 2013 is positive, and that the stock is very linked to commodities, means we should keep an eye on it.”
The group, which produces agricultural fertilizers and road salts, indicated that it had an optimistic outlook for potash, an important ingredient for fertilizers, which could positively impact its profits. The mild winter, though, weighed on the road salt activity.
“Both potassium and magnesium segments went through a major growth,” Scarpaci explained, “but the salt segment, which stayed stable, remains the company’s weak side.”
K+S , whose activity is very cyclical, suffered a lot through 2011, when its shares went below 33 euros ($43) from a high of 55 euros ($72).
“K+S is now trading at 30 euros per share, and our price target is at around 45 or 46 (euros),” Scarpaci said, “just today, it was already gaining 6 percent.”
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Arnaud Scarpaci does not personally own any K+S stocks, but his employer, Agilis Gestion, owns K+S shares.