March 10, 2016 / 6:39 AM / 2 years ago

UPDATE 1-K+S flags earnings drop in 2016 due to crimped output

* Sees significant drop in potash, magnesium prices, sales volumes

* Has only provisional approval for saline waste water discharge

* Q4 adjusted EBIT up 18 pct to 154 mln eur (Adds details on waste water issue, earnings, Canadian mines)

FRANKFURT, March 10 (Reuters) - Salt and fertiliser supplier K+S warned of a significant drop in operating profit this year, citing lower potash prices and output restrictions at its German mines due to stricter regulation of waste water discharge.

“A significant drop in average prices in the Potash and Magnesium Products business unit, as well as sales volumes slightly below those of the previous year is anticipated,” the German company said in a statement on Thursday.

K+S in December was granted only provisional approval for further discharge of saline waste water in the German state of Hesse and warned that the limits imposed by the regulator could crimp output over the next few months.

Fourth-quarter earnings before interest and tax, adjusted for currency hedging effects, rose 18 percent to 154 million euros ($169 million), helped by a strong dollar, which was slightly above the average analyst forecast of 147 million euros in a Reuters poll.

K+S, which fended off a takeover approach by Potash Corp of Saskatchewan last year, stood by plans to bring a new Canadian potash mine known as Legacy on stream by end-2016.

This will help it reach its goal of 1.6 billion euros in 2020 earnings before interest, taxes, depreciation and amortisation (EBITDA), up from 1.1 billion last year.

Legacy would be the first new mine in the potash industry in four decades and undermines efforts by potash industry leader Potash Corp and North American export cartel Canpotex to cut output to shore up prices.

Earlier this year, Potash Corp decided to close its newest potash mine in New Brunswick and to curtail production at two other Canadian mines for four weeks. ($1 = 0.9112 euros) (Reporting by Ludwig Burger; Editing by Georgina Prodhan)

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