Uralkali said Tuesday that 2008 profit rose 172 percent year on year to 21.9 billion rubles ($653 million), despite waning demand for its potash fertilizer in the fourth quarter.

Revenue was up 113 percent to 62.8 billion rubles for the year, the company said in an e-mailed statement. Uralkali's shares closed down 2.1 percent Tuesday afternoon on the MICEX, in line with the exchange's 30-stock index.

Uralkali, the country's second-largest potash producer, paid 2.3 billion rubles to the Perm regional government on Thursday to reimburse the state for damage caused when a flood at Mine 1 caused a giant sinkhole. Of that sum, 1.8 billion rubles will be allocated to the federal government.

The company said in its earning report that it had set aside 7.8 billion rubles for any future expenses related to the 2006 accident, including the 2.3 billion rubles to reimburse the government for resettling local residents.

An additional 5.5 billion rubles has been put aside to help Russian Railways finance a railway bypass and the construction of a new 53-kilometer line.

In November, Deputy Prime Minister Igor Sechin reopened an investigation into the mine collapse, prompting Uralkali to warn at the time that its "future existence is in doubt."

The company has revised its $3 billion project to build Mine 5 at Ust-Yaivinsky field and is instead in the process of linking it to Uralkali's existing Mine 2, CEO Vladislav Baumgertner said on a conference call Tuesday evening.

The company abandoned the first project on concerns that it would lose its license from the Federal Subsoil Resource Use Agency.

Uralkali will spend 5.2 billion rubles in expansion in 2009 and 5.5 billion rubles on maintenance, after capital expenditures rose 127 percent to 14.3 billion rubles last year, Baumgertner said.

While the company enjoyed an "exceptionally favorable market environment" during the first three quarters of 2008, Uralkali was forced to reduce production by as much as 25 percent in the fourth quarter, he said.

In first quarter, Uralkali operated at 35 percent, the capacity it needs to break even, he said.

Uralkali currently has an option to extend its $420 million credit line by $500 million, which would allow the company to have a "strong position in negotiations with China and India" to set contract potash prices for 2009, chief financial officer Kuzma Marchuk said on the conference call.

While India's potash inventories have become very low, China has enough inventory for several months, making it less anxious to settle, said Oleg Petrov, head of sales of the Belarusian Potash Company, in which Uralkali controls a 50 percent stake.

The three executives said the price of potash was facing heavy downward pressure as global farmers delay their purchase of the fertilizer, hoping that prices will drop further.