* Says sales, profit decline more severe than thought
* To curtail potash output by 2 mln tonnes in H2
* Shares slump 12.8 pct (Adds company comment, more details, background, shares)
FRANKFURT, June 17 (Reuters) - German fertiliser and salt maker K+S SDFG.DE is bracing for a more significant drop in earnings and sales this year than previously forecast as farmers continue to hold off on potash orders, it said on Wednesday.
“European agriculture exercised great restraint in the use of potash fertilisers in the spring,” the group said in a statement.
The world’s fourth-biggest potash maker abandoned hopes of a recovery in potash demand in the second half, which it had previously predicted.
It added that there was no sign of any significant upturn in demand in Europe, which accounts for almost two-thirds of the company’s fertiliser sales.
Larger rival Potash Corp (POT.TO) earlier on Wednesday announced it would cut 2009 potash production by a further 800,000 tonnes, bringing curtailments this year to 4.7 million tonnes.
It cited an “extremely slow U.S. spring season” and protracted negotiations with China, the world’s largest potash importer.
Shares in K+S plummeted 12.8 percent to 42.95 euros at 1300 GMT, its Russian rival Uralkali (URKA.MM) dropped 7.2 percent, while Norway’s Yara International (YAR.OL), which focuses on nitrogen fertiliser, lost 7.2 percent.
Prices of agricultural commodities followed the boom and bust of financial markets over the last two years, as investors rushed in and later abandoned the asset class, also buffeting fertiliser demand.
K+S reduced its sales volume expectations for potash and magnesium fertilisers in 2009 to between 4 and 4.5 million tonnes from 6 million tonnes previously, it added.
It plans to reduce potash production in the second half by up to 2 million tonnes, following a reduction of 2 million tonnes in the first half.
It also cut the European price of granulated potassium chloride, the fertiliser mineral extracted from potash ore, to 435 euros ($603) from 555 euros previously and added that overseas prices were also slipping.
The company had previously expected farmers to boost production because grain inventories had been at historic lows, but fertiliser demand remained sluggish as growers put orders on hold in anticipation of a further decline in prices. (Reporting by Ludwig Burger; Editing by Rupert Winchester)