UPDATE 2-Israel Chem Q4 profit up, Q1 sales to fall

* Q4 adjusted net profit $279.1 mln vs $282 mln in poll

* Revenue $1.12 bln vs $1.26 bln in poll

* Q1 sales to decline from Q4

* Declares dividend of $175 million

(Adds outlook, analysts' quotes, share reaction)

By Tova Cohen

TEL AVIV, March 30 (Reuters) - Israel Chemicals (ICL) (ICL.TA) posted a slightly below forecast rise in fourth-quarter profit excluding one-off items and the fertiliser and specialty chemicals maker predicted a drop in sales in the first quarter.

"The global credit crisis that emerged in September 2008 and the subsequent economic slowdown are expected to continue to negatively impact ICL's activities in early 2009," ICL, the second-largest company on the Tel Aviv bourse, said on Monday.

"ICL's sales in the first quarter of 2009 are expected to be lower than fourth quarter 2008 sales in all its sectors. For some of ICL's products prices have also fallen," the company added.

ICL shares were down 5.1 percent at 35.45 shekels at 1022 GMT compared with a fall of 2.5 percent in the broader market.

Gilad Alper, an analyst at brokerage Excellence Nessuah, said ICL's results were weak as expected.

As ICL is generally driven by economic trends, especially the price of oil, Alper said he viewed the fourth quarter 2008 and first quarter 2009 results as a "non-event".

"Should the price of oil recover to $60-$70 then ICL would be an excellent proxy for the recovery. Otherwise, should the price of oil continue to hover around $40-$55 the entire 2009 could be a wash," he said.

Fertiliser demand has been weak so far in 2009 as has demand for ICL's industrial and performance products, Citigroup analyst Sophie Jourdier said in a note to clients.

"The medium-term outlook rests mainly on the success or otherwise of the potash industry to maintain current high prices," Jourdier said.

NET PROFIT UP

ICL, which produces a third of the world's bromine and 9 percent of its potash, posted a quarterly net profit of $175.8 million, up from $173.4 million a year earlier. Excluding one-time charges net profit rose to $279.1 million.

Revenue in the October-December period slipped to $1.12 billion from $1.21 billion, reflecting the global credit crisis and economic slowdown, which affected quantities sold of most of the company's fertilisers and other products.

Analysts on average had expected ICL to earn $282 million excluding charges on revenue of $1.26 billion, according to a Reuters poll of seven analysts.

ICL's board declared a dividend of $175 million to be paid on May 4, up from $115 million a year earlier. This brings the total 2008 dividend to $1.028 billion, its largest annual dividend on record.

Jourdier said the payout ratio of 100 percent is higher than Citigroup's estimate and takes ICL's 2008 dividend per share to 80 cents versus Citi's 72 cent estimate.

"This reflects better-than-expected cash flow in the fourth quarter," she said.

Citigroup rates ICL shares "hold", saying they have held up better than most of its potash peers.

ICL is controlled by holding company Israel Corp (ILCO.TA) while Potash Corp of Saskatchewan (POT.TO) owns 12 percent. (Editing by Jon Loades-Carter)