Terra Industries Inc. Triples Quarterly Earnings, Declares Dividend

Terra Industries Inc. (NYSE: TRA) announced today income available to common shareholders for the 2008 third quarter of $164.9 million ($1.64 per diluted share), up from $53.1 million ($.51 per diluted share) for the same period in 2007. For the 2008 first nine months, Terra reported income available to common shareholders of $467.2 million ($4.54 per diluted share), up from $128.4 million ($1.24 per diluted share) in the 2007 first nine months.

Terra also declared a dividend of $.10 per common share, payable Dec. 12, 2008, to holders of record as of Nov. 24, 2008.

Analysis of third quarter results

Revenues for the 2008 third quarter totaled $790.2 million, compared to $580.5 million for the 2007 third quarter. The 2007 revenues included $108.1 million from Terra’s UK operations that were later contributed to a joint venture. Excluding the 2007 UK results, revenues increased $317.8 million from the 2007 to the 2008 third quarter, primarily due to higher nitrogen products selling prices. Ammonia, urea ammonium nitrate (UAN) and ammonium nitrate (AN) selling prices increased 94, 47 and 56 percent, respectively, over those of the same period last year. The improved selling prices reflect strong nitrogen products demand resulting from low grain inventories and strong commodity grain prices. North American sales volumes for UAN and AN increased by 8 and 30 percent, respectively, while ammonia sales volumes decreased 4 percent from those of the same period last year. The significantly higher AN sales volumes were due to the 2007 third quarter volumes having been reduced when the Yazoo City manufacturing facility undertook an extended nitric acid turnaround.

During the third quarter Terra restarted its Donaldsonville, Louisiana ammonia plant. Due to mechanical and weather-related issues the plant operated intermittently in August and through mid-September. As a result, the plant incurred start-up costs of approximately $7.5 million ($5.5 million or $0.05 per share, after tax). These costs are included in cost of sales for the 2008 third quarter. The plant has operated well since late September.

Third quarter equity earnings of affiliates of $42.1 million reflect Terra’s interest in earnings from the GrowHow UK joint venture.

Earnings per share for the third quarter were reduced by $0.05 per share as a result of the $5.2 million inducement payments associated with the conversion of preferred shares.

Analysis of year-to-date results

Revenues for the 2008 first nine months totaled $2.2 billion compared to $1.8 billion for the 2007 period. The 2007 revenues included $319.1 million from Terra’s UK operations that were later contributed to a joint venture. Excluding the 2007 UK results, revenues increased $753.2 million from the 2007 to the 2008 first nine months, mostly due to higher nitrogen products selling prices. Ammonia, UAN and AN selling prices increased 59, 50 and 40 percent, respectively, over those of the same period last year. Selling prices for the first nine months improved for substantially the same reasons as they did for the third quarter. North American sales volumes for ammonia and AN increased by 5 and 8 percent respectively, from those of the same period last year, while sales volumes for UAN remained stable. Sales volumes for the first nine months were generally affected by the same factors affecting those of the third quarter.

Year-to-date equity earnings of affiliates of $89.0 million reflect Terra’s interest in earnings from the GrowHow UK joint venture.

Forward natural gas position

Terra’s forward purchase contracts at Sept. 30, 2008, fixed prices for about 36 percent of its next 12 months’ natural gas needs at about $188 million above the published forward market prices at that date. These forward positions hedge production costs primarily associated with product that Terra has sold and plans to ship in the 2008 fourth quarter and 2009 first quarter.

Cash balances, customer prepayments and share buybacks

Cash balances, including about $195 million in customer prepayments, totaled $681 million at Sept. 30, 2008. Terra expects to ship products under customer prepay agreements during the 2008 fourth quarter and 2009 first quarter.

During the 2008 third quarter, Terra repurchased approximately 2.4 million of its common shares under its share buyback program at an average price of $41.69 per share and a total cost of $100 million. The program authorizes Terra to repurchase approximately 12.8 million shares (14 percent of its current outstanding shares) and extends through June 30, 2010. At Sept. 30, 2008, approximately 10.3 million shares remained available for repurchase under the program.

CEO’s remarks

Said Terra President and CEO Mike Bennett, "We are pleased with Terra’s third quarter performance. We also expect strong fourth quarter performance, in part because we have secured margins on substantial volumes of forward sales against which we have locked in natural gas purchases.”

Bennett continued, "As we look ahead to 2009, industry projections indicate an increase in nitrogen fertilizer demand driven by increased demand for grain. It remains to be seen what effect the broad economic slowdown will have on our industrial customers. To date, credit issues have not had a notable impact on our customer base.

"While current global urea prices are sharply lower than they were in the summer, domestic natural gas prices have also dropped dramatically, continuing to support favorable projected margins.”

Conference call details

Terra management will conduct a conference call to discuss these third quarter results this afternoon at 3:00 ET. A live webcast of the conference call will be available from Terra’s Web site at www.terraindustries.com, and will be archived for playback for three months.

About Terra

Terra Industries Inc., with 2007 revenues of $2.4 billion, is a leading international producer of nitrogen products.

Forward-looking statements

Certain statements in this new release may constitute "forward-looking” statements within the meaning of the Private Litigation Reform Act of 1995. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. As a result, these statements speak only as of the date they were made and Terra undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Words such as "expects,” "intends,” "plans,” "projects,” "believes,” "estimates,” and similar expressions are used to identify these forward-looking statements. These include, among others, statements relating to:

• financial markets,
• general economic conditions within the agricultural industry,
• competitive factors and price changes (principally, sales prices of nitrogen and methanol products and natural gas costs),
• product mix,
• the seasonality of demand patterns,
• weather conditions,
• environmental and other government regulation, and
• agricultural regulations.

Additional information as to these factors can be found in Terra’s 2007 Annual Report/10-K, in the sections entitled "Business,” "Legal Proceedings,” and "Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the Notes to the consolidated financial statements.

Note: Terra Industries’ news announcements are also available on its Web site, www.terraindustries.com.