Terra Industries Inc. Reports Improved Fourth Quarter Results.

SIOUX CITY, Iowa -- Terra Industries Inc. (NYSE:TRA):

SUMMARY

Fourth quarter performance:

* Income from operations up $57.7 million.

* Gross profits per ton improved for all major products--ammonia, UAN and ammonium nitrate.

* Company-owned facilities averaged 97% operating rates.

Outlook:

* Low projected grain inventories are expected to increase nitrogen demand through increased 2007 planted acres of corn and wheat.

* Nitrogen prices firmed during the fourth quarter and are expected to exhibit seasonal increases through the 2007 planting season.

Terra Industries Inc. (NYSE:TRA) announced today 2006 fourth quarter net income available to common shareholders of $10.3 million, or $.11 per common share, on revenues of $449.5 million for the quarter ended Dec. 31, 2006. This represents a $26.7 million improvement over the net loss to common shareholders for the 2005 fourth quarter of $16.4 million, or $.17 per share, on revenues of $513.4 million.

For 2006, Terra posted a net loss to common shareholders of $0.9 million, or $.01 per share, on revenues of $1.8 billion. Net income available to common shareholders for 2005 was $17.0 million, or $.18 per share, on revenues of $1.9 billion.

Cash balances totaled $179.0 million at Dec. 31, 2006. During the 2006 fourth quarter, Terra did not repurchase any shares under its authorization to repurchase up to 9.5 million of its outstanding common shares by June 30, 2008. Since announcing this authorization, Terra has repurchased 2.7 million common shares.

Analysis of fourth quarter results

Fourth quarter 2006 revenues of almost $450 million were $64 million lower than those of the 2005 fourth quarter mainly in response to lower product prices. Ammonia, UAN and urea selling prices declined 17%, 15% and 23% respectively from prior year levels, due mostly to increased 2006 North American production rates in response to lower North American natural gas costs.

Nitrogen margins improved over the previous year as cost of sales declined by $136 million, due mainly to lower natural gas costs. North American natural gas costs averaged $6.35 per MMBtu during the 2006 fourth quarter compared to $11.36 per MMBtu in the 2005 fourth quarter.

As compared to the 2005 fourth quarter, 2006 operating income was reduced by a $7.5 million decline to equity earnings, mostly as the result of lower operating rates at the Point Lisas Trinidad facility, and a $6.9 million increase to selling, general and administrative expenses, which included professional fees associated with Terra's proposed U.K. joint venture with Kemira GrowHow and higher expenses for share-based compensation. Terra expects the conditions causing lower operating rates at the Point Lisas Trinidad facility to continue until repairs are completed during the 2007 first quarter.

Analysis of full-year results

Terra's 2006 revenues of $1.8 billion were $102 million lower than 2005 revenues, mainly due to lower UAN and ammonium nitrate sales volumes, which were affected by lower overall fertilizer consumption during the 2006 planting season.

2006 operating income was $66 million, or $47 million lower than 2005 operating income, due mostly to curtailed production rates during the first half of 2006. Operating rates averaged only 74% of plant capacity during the 2006 first half, which resulted in higher costs for purchased product and reduced plant efficiencies. Those effects were mitigated during the 2006 second half as operating results normalized in response to higher grain prices and stable natural gas costs.

Forward natural gas position

Terra's forward purchase contracts at Dec. 31, 2006, fixed prices for about 17 percent of its next 12 months' natural gas needs at about $19.1 million above the published forward market prices at that date. The majority of these forward purchase contracts support nitrogen sales commitments.

CEO's remarks

"As expected, better global demand for nitrogen driven by strong grain markets and more favorable energy markets contributed to improved financial and operating performance for Terra in the fourth quarter," said Terra President and CEO Michael Bennett. "As we move into the spring application season, product movement is brisk to meet strong nitrogen demand, and nitrogen selling prices have continued to firm. Nitrogen market indications continue to support our positive view of Terra's prospects through the 2007 first half."

Conference call details

Terra management will conduct a conference call to discuss these fourth quarter and full-year results this afternoon at 3:00 ET. A live webcast of the conference call will be available from Terra's website at www.terraindustries.com, and will be archived for playback for three months.

About Terra

Terra Industries Inc., with 2006 revenues of $1.8 billion, is a leading international producer of nitrogen products.

Forward-looking statements

This news release may contain forward-looking statements, which involve inherent risks and uncertainties. Statements that are not historical facts, including statements about Terra Industries Inc.'s beliefs, plans or expectations, are forward-looking statements. These statements are based on current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements is set forth in Terra Industries Inc.'s most recent report on Form 10-K and Terra Industries Inc.'s other documents on file with the Securities and Exchange Commission. Terra Industries Inc. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

Note: Terra Industries' news announcements are also available on its website, www.terraindustries.com.

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