FRANKFURT German potash miner K+S's (SDFGn.DE) quarterly operating profit dropped a worse than expected 37 percent, hurt by lower fertilizer prices and by environmental restrictions which might still pose a burden this year until it puts a new water treatment plant into operation.
First-quarter earnings before interest and tax (EBIT), adjusted for currency hedging effects, dropped to 137 million euros ($150 million), below the 152 million euros expected on average by analysts, also hurt by a one-off payment to workers from a wage bargaining agreement.
The group said it still expected a tangible increase in 2017 revenues and operating earnings, citing strong demand as driving a recovery in potash prices, but it warned that limits to how much salty waste water its main Werra potash extraction site can discharge into the Werra river might drag earnings lower.
"Further production limitations at the Werra plant during longer periods of low water levels in the Werra cannot be ruled out for the rest of the year," it said in its statement, pointing to two major investments that should boost output in 2018.
The German mining group, which competes with fertilizer rivals Potash Corp (POT.TO), Uralkali (URKA.MM) and Belaruskali, said it was on track to put a waste water treatment plant on stream next year to become less reliant on the Werra river as an outlet for effluent.
Also from next year, its newly opened Canadian Bethune mine, previously known as Legacy, will add 2 million tonnes to the group's potash output capacity.
Many industry observers, however, see the German group's foray into North America - to offset the gradual depletion of its German mines - as aggravating excess Canadian supplies in the home market of rivals Potash Crop, Agrium (AGU.TO) and Mosaic (MOS.N).
(Reporting by Ludwig Burger; Editing by Maria Sheahan)