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Potash Corp.’s offices in Saskatoon.

David Stobbe/Reuters

Potash Corp. of Saskatchewan Inc. on Thursday cut its profit forecast for the year due to weak demand after the break-up of the Russian-Belarusian potash cartel rattled markets and sent prices of the crop nutrient tumbling.

The Saskatoon-based company, which produces about 20 per cent of the world's supply of potash, said it will now earn between $2 to $2.20 a share this year, down from its previous forecast of between $2.45 and $2.70 per share.

"The most recent quarter can best be characterized as a predictable response to an unpredicted event," Potash Corp.'s chief executive officer Bill Doyle said in a statement announcing the company's third quarter results. "As we have seen in the past, fertilizer customers faced with uncertainty act with extreme caution," he said.

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The weaker forecast from Potash Corp. is the latest sign that the potash industry is struggling to deal with the fallout from the Belarusian Potash Corp. (BPC) break up. Earlier this year, Russia's OAO Uralkali pulled out of the Belarus joint venture with its rival Belaruskali.

Together with its Canadian counterpart known as Canpotex, the two joint ventures controlled 70 per cent of the potash market and could therefore influence the price of the fertilizer by controlling the supply.

Potash Corp., which warned two weeks ago that it would miss its third-quarter earnings target, reported a profit that was in line with its guidance of $356-million, or 41 cents a share. That was down 45 per cent from the $645-million, or 74 cents, it earned in the year earlier period.

With the price of potash falling, customers have delayed buying the crop nutrient.

"While this volatility does not change the long-term underlying fundamentals of fertilizer demand, it did significantly slow market activity and our ability to deliver the results we expected," Doyle said.

Potash Corp., which also produces two other nutrients used to grow crops phosphate and nitrate , said its average realized potash price fell 23 per cent to $307 a tonne from $429 a tonne in the same period a year earlier.

The company's gross margin for phosphate declined to $228-million in the third quarter from the $554-million earned last year. Meanwhile, sales of the company's other key crop nutrients, nitrogen and phosphate also fell in the third quarter.

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The gross margin for phosphate dropped to $78-million from $122-million earned in the third quarter last year, while gross margin for nitrogen fell to $178-million from $251-million last year.

Doyle said there were signs that potash buyers would be filling orders and pointed to strong demand from Brazil and potential increased demand from China.

"We anticipate buyers in other Asian countries will engage more actively through the final quarter of 2013. With many customers entering their major tender season, supportive grower economics and limited inventories are expected to result in increased fourth-quarter shipments," he said.

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