UPDATE 2-Incitec Pivot H1 profit triples, ups year forecast

(Adds analyst comment, Metex stake, share price)

SYDNEY, May 5 (Reuters) - Australia's top fertiliser maker, Incitec Pivot Ltd (IPL.AX), said its first-half profit more than tripled to a record, spurred by soaring prices that are set to propel year earnings above forecast amid a global agricultural boom.

Incitec, which has made a A$3 billion-plus ($2.8 billion) bid for Dyno Nobel Ltd DXL.AX, raised its year earnings estimate by around 19 percent and said demand for fertiliser should continue to grow unabated, leading to continued strength in prices.

"You have prices of coal going up and prices of fuel going up in response to huge economic growth in China and India and other areas. That in turn sparked demand for food," said Chief Executive Julian Segal.

"As the standard of living in these countries increases, they want to eat more and they want to eat better. Fertiliser is an answer to the problem."

Earnings before interest and tax (EBIT) for 2008 would likely rise to A$850 million, based on an industry forecast price of US$1,100 a tonne for diammonium phosphate (DAP) in the second half, Chief Financial Officer James Fazzino said.

A previous EBIT company forecast of A$700-730 million "now looks conservative," Fazzino said, adding the company was basing its internal forecasts on EBIT of A$850 million and that at current spot prices of around $1,200 a tonne, Incitec's 2008 EBIT would reach A$915 million.

Analysts had already been expecting A$886 million EBIT this year, according to the average of nine Reuters Estimates forecasts taken before the announcement.

"We knew upgrades were coming with this result. Potentially that A$850 (million) may prove a bit conservative," said Belinda Moore, analyst at ABN AMRO, who has a buy recommendation on the stock.

"We do, over the next 12 months, see the share price going well above current levels. It's the most leveraged (Australian company) to the soft commodity boom and when it combines with Dyno, it will be very much a core portfolio holding," she said.

Global diammonium phosphate spot prices have nearly tripled from $433 a tonne at end-September, lifting Incitec's average price by $365 to $658 a tonne in the first half. Segal said the higher levels could persist in the medium term.

"I certainly would not venture to forecast that prices will go any further up but I think they will stabilise at current levels and then ... probably dip a little in about 4-5 years," said Segal.

Incitec's October-March EBIT was A$250 million. Net profit excluding items rose to A$171.1 million from A$49.6 million a year earlier. Five analysts on average had expected net profit of A$170.3 million.

Segal said Incitec plans to combine its manufacturing operations with those of Dyno Nobel, which makes explosives from the same nitrogen-based chemicals found in fertiliser.

"We expect (cost synergies) will be substantial over the medium term," said ABN AMRO's Moore. "Incitec will run those plants harder and faster and improve them, and there will be ability to flex production between fertilizer and ammonium nitrate depending on what has the better margin at the time," she said.

Incitec shares were up 2 percent at A$174.90 by 0305 GMT. The stock is up 50 percent this year, putting it among the top six performers in the S&P/ASX 200 index .AXJO. The stock hit a life high of A$179.98 last Monday.

Shares in Australian prospector Metex Resources Ltd MEE.AX jumped 16.4 percent to A$0.32 after Incitec revealed plans to buy 55 million Metex shares for A$11 million. The pair are considering a 1,000 tonnes a day ammonia plant. ($1=A$1.07) (Reporting by Miranda Maxwell; Editing by Ian Geoghegan)