Incitec Pivot Ltd. (IPL), Southbank, Victoria, has revealed distribution volumes in its fertilizer business have fallen as a result of lower demand, largely due to higher pricing, and global fertilizer supply constraints.
Managing Director and CEO Jean Johns told shareholders at a company Investor Day on Sept. 6 that FY2022 Earnings Before Interest and Tax (EBIT) for the distribution arm, part of IPL Fertilisers Asia Pacific business, is forecast at A$40-$45 million. EBIT for the half-year to March 31, 2022 was A$18.6 million, a 2% increase on the same year-ago period (GM May 27, p. 25)
But IPL’s gas bill has increased by around $45 million due to gas supply disruptions at the Phosphate Hill, Queensland, phosphate fertilizer plant. Gas supply disruptions have forced the operation to source additional gas from the spot market and under short-term contracts to meet shortfalls. But IPL said contract gas supplier Power and Water Corp. has confirmed that full quantities are expected to be restored in February 2023.
Phosphate Hill is now working at nameplate capacity following the completion of a turnaround. Annual production volumes are forecast to be around 750,000 mt for FY 2022. Ammonium phosphates production saw a marginal uptick (1%), to 431,900 mt in the first fiscal half.
IPL confirmed the planned discontinuation of its Gibson Island ammonia and urea manufacturing facilities in Brisbane, Queensland – announced in November 2021 (GM Nov. 12, 2021) – remains on track for the end of this calendar year when the gas contract expires. It said the closure costs remain substantially in line with previous disclosures.
The company’s decision to close the plant was due to it being unable to secure “an economically viable” long-term gas supply to the plant beyond its current supply contract, “despite extensive efforts”
Regarding IPL’s Dyno Nobel Americas (DNA) business, IPL told shareholders its explosive business was experiencing some supply chain and inflationary pressures, and to expect a lag in earnings’ recovery on account of pass-through and contract price resets.
It also reported the company has deferred the planned turnaround of the Cheyenne, Wyo., ammonium nitrate plant to FY2023 due to the non-availability of critical equipment.
In its Dyno Nobel Asia Pacific (DNAP) segment, IPL reported the business is also facing some impacts from La Niña, as well as supply chain disruptions.
IPL reported a big surge in net profit after tax (NPAT) to A$384.1 million for the first half of FY2022 to March 31, 2022, up from A$36.4 million the previous year. Earnings per share were 19.8 Australian cents versus the year-ago 1.9 cents. EBIT increased by 416% to A$568.2 million, up from A$110.2 million, while revenue rose 48% to A$2.55 billion, up from the prior year A$1.72 billion.
In May, IPL announced that it had revived its plan to separate its Incitec Pivot Fertilisers and Dyno Nobel businesses to create two separate companies, with plans to demerge its fertilizer and mining explosives divisions into two separately Australian Securities Exchange (ASX) listed companies by mid-2023 (GM May 27, p. 1).
The company said the decision to pursue a structural separation of the company is the result of a comprehensive review, “with robust underlying market conditions supporting each business to move forward with appropriately strong balance sheets.”