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* Q2 net profit $295.9 mln vs $255.8 mln forecast
* Revenue $1.49 bln vs $1.41 bln forecast
* Sets dividend of $177 mln
* ICL shares down 1.13 pct to 50 shekels
* Broader Tel Aviv market down 1.14 percent (Adds analysts' comments, details, share price)
By Tova Cohen
TEL AVIV, Aug 24 (Reuters) - Israel Chemicals (ICL) (ICL.TA), in which bid target Potash Corp (POT.TO) owns 13.9 percent, reported a stronger-than-expected rise in second-quarter net profit, boosted by higher sales volumes.
Analysts said on Tuesday that the results for the company, which sells potash and phosphate fertilisers as well as bromine products, were excellent but overshadowed by external events.
"We expect the rumour mill around the Potash (Corp) acquisition and grain prices to continue to influence the direction of ICL shares," Meitav analyst Gilad Alper said.
Shares in ICL, the world's sixth-larger producer of potash, were down 1.03 percent to 50.08 shekels by 1030 GMT, in line with the broader Tel Aviv market .TA25, having risen to an eight-month intraday high of 54.00 shekels on Aug. 17 when the Potash Corp bid was rejected.
The global economic crisis began to hit the fertiliser market in the fourth quarter of 2008 but demand for potash and phosphate fertilisers has started to bounce back.
ICL's quarterly net profit rose to $295.9 million from $152.3 million a year earlier. Revenue increased 38 percent to $1.495 billion, reflecting sharply higher sales quantities in all of the company's segments, which was partly offset by lower prices for potash.
ICL, the second-largest company on the Tel Aviv Stock Exchange and controlled by conglomerate Israel Corp (ILCO.TA), was forecast in a Reuters poll to earn $255.8 million on revenue of $1.41 billion.
Potash sales in Israel and abroad rose four-fold to 1.53 million tonnes, the second-largest quantity the company has sold in a single quarter.
Barclays analyst Joseph Wolf noted that ICL's peers grew revenues anywhere from 70 to 200 percent while ICL's potash sales rose 134 percent to $564 million.
ICL said it sold significant quantities of potash to China and India in the quarter while Brazil's imports "rose dramatically during the first half of 2010 ... and has continued during the third quarter in anticipation of a strong planting season".
In Western Europe, fertiliser demand has been returning gradually to levels customary before the economic crisis, and in the United States the early timing of the spring planting season led to a high level of fertiliser demand in the first half and is expected to lead to a long autumn planting season.
Bank Hapoalim analyst Yaron Fridman said the average price of $356.3 a tonne for potash disappointed and was due to large contracts signed with customers in China and India.
"We estimate these price levels will rise in coming quarters due to the prices at which new agreements have been signed in recent months, especially at spot prices to North and South America," said Fridman, who rates ICL "outperform".
ICL is also the world leader in bromine flame retardants for the electronics industry. The company said average selling prices, which declined in 2009 due to the global economic crisis, strengthened steadily in step with firmer demand.
Prices of bromine and brominated flame retardants were also affected by declining Chinese bromine production.
The board declared a dividend of $177 million, or 14 cents a share, to be paid on Sept. 20, compared with $100 million, or 8 cents a share, in the year-earlier period.
In June ICL paid a $500 million one-time dividend and a $168 million dividend for the first quarter. ($1 = 3.81 shekels) (Editing by Sharon Lindores)