* Shares hit lowest since late April

* Incitec to commence already announced A$900 mln buyback

* Co to manage Dyno Nobel and Incitec Pivot Fertilisers units separately

July 10 (Reuters) - Australia's Incitec Pivot said on Wednesday it had ceased negotiations with potential Indonesian buyer Pupuk Kaltim for selling its fertilisers business, sending the chemicals maker's shares to a more than two-month low.

Incitec failed to balance out the risks of completing a deal withing a "reasonable timeframe" and maximizing value for its investors, leading to the talks ending, it said.

Shares in Incitec dropped as much as 6.2% to A$2.72, their lowest since late April, while the benchmark index fell 0.5%.

Incitec has been looking for ways to improve value and returns for its shareholders and now will begin a share buyback worth up to A$900 million ($606.51 million), after the talks with PT Pupuk Kalimantan Timur, Southeast Asia's biggest urea fertilisers manufacturer, fell through.

"Given that the potential purchaser PT Pupuk Kalimantan Timur is an Indonesian state-owned enterprise, approval from the Foreign Investment Review Board would have been uncertain if the sale had proceeded because of the importance of Incitec Pivot's fertiliser supply in the Australian food chain," said Ian Chitterer, vice president and senior credit officer, Moody's Ratings.

Pupuk Kaltim did not immediately respond to a Reuters request for comment.

Incitec had said in May that it was in advanced talks with the Indonesian firm over the unit divestiture and had put a pause on the A$500 million buyback announced in December.

Incitec added that its primary focus would be to progress the buyback, while it continues to "assess options" for the separation of its explosives and fertilisers businesses.

The firm will continue to manage its explosives business, Dyno Nobel and the fertilisers business separately, it said.

Incitec has in the past faced investor backlash over its plans to de-merge the explosives manufacturing business by way of a separate listing.

($1 = 1.4839 Australian dollars) (Reporting by Rajasik Mukherjee and Archishma Iyer in Bengaluru; Editing by Alan Barona and Rashmi Aich)