UPDATE 2-K+S' warning of lower potash prices drags shares lower

Tue Nov 13, 2012 4:22pm IST

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* Cuts adj EBIT outlook to lower end of previous range

* Sees 2013 adj EBIT up slightly, worse than expected

* Protracted talks with buyers India, China weigh on prices

* Shares lose 4.7 percent

FRANKFURT, Nov 13 (Reuters) - German potash and salt miner K+S cut its 2012 profit outlook on Tuesday and said it was concerned about next year due to a decline in prices for its fertiliser minerals.

K+S now expects 2012 earnings before interest and tax, adjusted for currency hedging effects, to reach about 820 million euros ($1.04 billion), at the bottom of its previously targeted range of 820-900 million euros, and down from 906.2 million last year.

The shares lost 4.7 percent to 34.22 euros at 0942 GMT, making them the second-worst performer on Germany's blue chip index.

Drawn-out talks between K+S's larger rivals in Canada and Russia, and potash importers China and India, among the world's largest users of the plant nutrient, have resulted in a decline in global potash prices at the end of the third quarter.

Even though K+S exports very little to China and India and derives more than half of its potash revenues from Europe, it will be hit by the global decline in prices.

"(This) leads to an overall cautious assessment," the group said in a statement.

K+S, the world's fourth-largest potash miner, also dampened market expectations for next year's earnings, saying annual average potash prices would be slightly lower than in 2012.

It sees a slight increase in 2013 adjusted EBIT from the 820 million predicted for this year, while analysts had projected 978 million in 2013 adjusted EBIT.

"We believe K+S will struggle to grow earnings in 2012 and 2013," Sanford Bernstein analyst Jeremy Redenius said, citing higher costs, nearly flat potash volumes due to production constraints and limited domestic reserves and increasing pressure on potash prices.

Third-quarter adjusted EBIT came in at 156.7 million euros, below the 166 million euro average estimate in a Reuters poll of 10 banks and brokerages.

Analysts had expected Canadian suppliers including Potash Corp to renew supply contracts with China and India in late summer, but now they say it may take until late 2012 or early 2013.

Potash Corp took a direct hit from the delay. Third-quarter earnings at the industry's No.1 fell 22 percent as a standoff over new contracts led to a sharp drop in shipments to China and India.

China is seen as being well supplied with the crop nutrient, while a reduction in Indian subsidies and a weaker rupee have made potash more expensive for that nation's farmers.

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