* Q3 revenue $1.818 bln vs $1.833 bln forecast
* Q3 net profit $395 mln vs $383 mln forecast
* Sees reduced potash shipments in Q4 vs Q4 2011
* Says indicators point to strong fertiliser sales in 2013
By Tova Cohen
TEL AVIV, Nov 21 Fertiliser and specialty chemical maker Israel Chemicals (ICL) expects a decline in shipments of potash in the final quarter as customers in India and China delay the renewal of contracts for the crop nutrient.
But the world's sixth-largest potash producer, which reported lower third quarter profit and sales on Wednesday, said that indicators point to strong sales of fertilisers in the 2013 planting season.
Canada's Potash Corp, the world's largest fertiliser producer, owns 13.9 percent of ICL, which is controlled by conglomerate Israel Corp.
Potash Corp has begun talks with Israeli officials on acquiring ICL, the second-largest company on the Tel Aviv stock market with a value of $14.9 billion, so it can shore up its leverage with China and India, which are expected to drive much of the industry's growth.
UBS analyst Roni Biron said a takeover by Potash was a "distinct possibility" following a general election in January, assuming Prime Minister Benjamin Netanyahu stays in power.
"While public opinion remains the main issue and anti-trust clearance may be required in different markets, the combination of a willing seller, interested buyer, and a potentially supportive prime minister makes this transaction more feasible, in our view," Biron said.
Despite declining world sales of potash in the third quarter, ICL sold 1.39 million tonnes in the quarter, almost unchanged from a year ago.
"However, the completion of existing contracts coupled with delayed renewals of contracts in India and China is expected to reduce the company's fourth-quarter 2012 potash shipments as compared with the fourth quarter of 2011," ICL said.
"The continued decline of global grain stock-to-use ratios to historically low levels, as predicted by the U.S. Department of Agriculture, and other indicators point to a market environment that will support strong sales of fertilisers in the 2013 planting season."
Bank of American Merrill Lynch analyst Andrew Stott said the likely absence of Indian sales will be especially negative for the fourth quarter.
Global potash peers such as Potash Corp and Mosaic have already pointed to a slowdown in the fourth quarter.
Q3 PROFIT FALLS LESS THAN EXPECTED
Third quarter net profit fell to $395 million from $436 million a year earlier as revenue slipped to $1.818 billion from $1.898 billion. Unfavourable exchange rate fluctuations accounted for $72 million of the drop in revenue while higher costs for raw materials and energy dragged on earnings.
ICL was forecast in a Reuters poll to earn $383 million on revenue of $1.833 billion. The beat in profit was due to lower tax and financial expenses, said Biron, who rates ICL "buy".
ICL's new chief executive, Stefan Borgas, said a balanced portfolio was helping the company to offset low economic growth.
Shares in ICL were down 0.45 percent to 45.54 shekels in afternoon trade in Tel Aviv.
The company's industrial products division showed a drop in quarterly revenue as the economic slowdown, especially in China, has led to reduced demand for brominated flame retardants used in electronics and building industry products.
As a result, production was halted at one of ICL's bromine units in the third quarter and this is expected to continue into the fourth.
ICL said it would pay a dividend of 21.7 cents, or a total of $276 million in the quarter, compared with $285 million for the second quarter.