Hi all,
I am looking to move into equity research and have made it to a final round interview for an associate position in a chemicals team at an American BB. It is down to myself and one other person and today I was asked by the MD in chems to look into a K+S, a German chemical company. The general story is that this company produces potash & salt out of 5 different mines in Germany (potash is the companies main source of profits). The company is a high cost prodcucer. The company is investing in a mine in Canada Canada to be able to grow its business and more than offset the future erosion in German production.
The complicating factor in the story is that a Russian comapany Russians started a price war in potash last summer and this hit the price of potash and , therefore the profitability of K&S hard. The price of potash went from $400/t to $300 in the space of a year.
K&S refinanced in December issuing €1bn in bonds. They claim now to have the liquidity to complete the project as they also have a €1bn unused syndicated loan facility. The balance sheet is also lowly geared at present.
I've been asked to look at the company and tell him what I think all this means for the company.
I have done about 7-8 hours research thus far and I am very on the fence, the unpredictability/lack of visibility of Potash prices makes this very difficult to make a clear cut buy/ sell.
Things I obviously need to think about :
1) financial analysis – some basic views, 2) summary points of financial evolution, 3) summary points on the market outlook, 4) what you think is discounted in the share price and whether we should be recommending the shares be bought or sold
I am planning on literally spend every second of my free time on this project.
I will be presenting a power ppt presentation early next week on my findings.
I am not a man who knows anywhere near enough about how to engage in research to call this and would appreciate any advise from those more knowledgable than I on how to best tackle this project
