* Sees FY EPS in range of $7-$8, previous $10-$12
* Will cut additional production if necessary
* Q1 EPS was $1.02 vs $1.74
* Shares down 2.4 pct at C$98.00 (Adds company comments, updates shares; in U.S. dollars unless noted)
By Scott Anderson
TORONTO, April 23 (Reuters) - Potash Corp of Saskatchewan (POT.TO)(POT.N), the world's biggest fertilizer company, reported a 46 percent drop in first-quarter profit and lowered its full-year outlook as it anticipates a slow recovery for the sector, sending its shares down more than 2 percent.
Potash Corp said on Thursday that it expected full-year profit of $7 to $8 a share, down from the outlook of $10 to $12 that it provided in January.
The company also forecast full-year potash gross margin of $2.5 billion to $3.0 billion and total shipments of around 6 million tonnes.
Potash said it expected second-quarter earnings per share of $1.10 to $1.50, well below analysts' average forecast of $1.93, according to Reuters Estimates.
Capital expenditures for the year are forecast at about $1.8 billion, with the majority of the spending earmarked for previously announced potash capacity projects.
But Potash Corp, which curtailed production by 1 million tonnes in the quarter, said it would make additional cutbacks if necessary.
"We will continue to reduce production by as many tonnes as it takes" Chief Executive Bill Doyle said on a conference call. "We believe this short-term pain is much better than putting profitability and future supply at risk."
First-quarter earnings fell to $308.3 million, or $1.02 per share, from $566 million, or $1.74 a share, a year earlier.
Analysts, on average, had expected profit of 82 cents a share, according to Reuters Estimates.
The company said tax adjustments added $166.8 million, or 55 cents per share, to the quarterly profit. The initial outlook had included about $95 million of the adjustments.
Revenue fell 51 percent to $922.5 million as deferred purchasing took hold. The analysts' average estimate was $857.8 million.
Potash shares, which had fallen by more than half since surging in mid-2008 to briefly make it Canada's largest company, were down 2.4 percent at C$98.00 on the Toronto Stock Exchange.
"It's no secret that the market has been at a standstill for a number of months now," said analyst Ben Johnson of Morningstar in Chicago.
"In the potash market in particular, people are just really playing wait and see in hopes of trying to peg future prices off whatever results from the coming Chinese and Indian negotiations. Everybody is expecting prices to come lower; how much lower is to be determined."
Fertilizer prices soared in early 2008 on surging demand, tight inventories and record grain prices.
But the global credit crunch and the deepening economic downturn have weighed on the agricultural sector, and grain and nutrient prices have fallen as farmers have deferred applying fertilizer.
The Saskatoon, Saskatchewan-based company said potash movement was extremely slow as many buyers waited for the outcomes of contract negotiations with China and India.
Potash has cut production as customers continue to work through stockpiles built up before the economic crisis hit.
$1=$1.24 Canadian Reporting by Scott Anderson; editing by Rob Wilson