Incitec Pivot Ltd. (IPL) said it is continuing to pursue a potential sale of its fertilizer business, while the planned sale of its Waggaman, La., ammonia plant to CF Industries Holdings Inc. remains conditional on approval from the US antitrust regulator.
In a Sept. 11 statement, the Australian group said the sale process of its fertilizer business is progressing “in line with normal expectations for a transaction of this size and complexity.” The company cautioned that discussions are confidential and incomplete and there is no certainty that any agreement will be reached or that any sale transaction will occur.
IPL confirmed in mid-July that it had received several approaches for the potential acquisition of the fertilizer business, noting that its Board was considering a potential sale of the business alongside ongoing proposals to structurally separate Incitec Pivot Fertilisers and the Dyno Nobel explosives business (GM July 14, p. 1). Indonesia’s state-owned PT Pupuk Kalimantan Timur (Pupuk Kaltim) is believed to be the preferred bidder (GM Aug. 11, p. 1).
In this week’s statement, IPL said it remains hopeful that the US Federal Trade Commission’s regulatory review process of the Waggaman sale will conclude by the end of calendar 2023. The group reached an agreement in March for the sale of the plant, which has 800,000 mt/y of ammonia capacity, to CF for a total value of $1.675 billion (GM March 24, p. 1).
IPL said its global Dyno Nobel explosives business is performing better than expected versus guidance comments in its first-half 2023 results in May (GM May 19, p. 24), while the fertilizer business performance is running below expectations. Overall, the group’s financial performance remains broadly in line with the outlook provided in May, IPL said.
“Dyno Nobel Americas’ focus on price and cost discipline in the explosives business has favorably impacted margins in the second half of the year,” the group said.
IPL expects Incitec Pivot Fertilisers’ (IPF) earnings in the Distribution business to be at the lower end of the “usual range” of A$40-$60 million (approximately $25.7-$38.5 million at current exchange rates) in FY2023.
While the second half has seen an improvement in fertilizer demand, resulting in projected full-year sales volumes being substantially in line with the prior year, IPL said margins remain depressed as a result of selling products into a negatively trending market and farmers switching to lower-margin products.
IPL also expects lower full-year output at its Phosphate Hill plant in northern Queensland, citing maintenance work at its Mount Isa, Queensland, sulfuric acid plant. The group now sees production of 870,000-880,000 mt of ammonium phosphate in FY2023, down some 30,000 mt from the output guidance given in May.
IPL said the volume of sulfuric acid supplied to Phosphate Hill in the second half will be reduced due to maintenance work at the Mount Isa plant brought forward from FY2024. The work is expected to take approximately three weeks to complete.
IPL expects the FY2023 EBIT impact from the reduced ammonium phosphate production to be in the range of A$13-$15 million, including the cost of repairs. However, the group noted that bringing the repair work forward is expected to reduce maintenance costs by roughly A$4 million from what would have otherwise been incurred in FY2024.
IPL said gas supply volumes under its long-term agreement with Power Water Corp. (PWC) for the Phosphate Hill plant have been above the forecast provided by PWC in June (GM June 9, p. 25). IPL now expects the EBIT impact from sourcing shortfall gas for FY2023 to be at the lower end of the A$75-$90 million range advised at that time.
IPL said Waggaman is expected to achieve nameplate capacity of 800,000 mt/y of ammonia in FY2023 in line with guidance in the first-half results. IPL said the Moranbah ammonium nitrate plant in Queensland, part of the Dyno Nobel Asia Pacific business, has had strong performance to date and is expected to achieve 360,000-370,000 mt of production this fiscal year, some 30,000-40,000 mt ahead of previous guidance (GM May 19, p. 24).