Melbourne-based Incitec Pivot Ltd. (IPL) on Nov. 13 reported a 45% decline in net profit after tax (NPAT) for the full year ended Sept. 30, to A$560.0 million (approximately $354.4 million at current exchange rates), down from the year-ago A$1.01 billion. The result beat the average analyst estimate of A$529 million (Bloomberg Consensus).
FY2023 NPAT excluding individually material items (IMIs) came in at A$582.1 million, down 43% from the year-ago A$1.03 billion, which IPL noted benefited from a very strong commodity price environment. Earnings per share excluding IMIs were 30.0 Australian cents versus 52.9 cents in FY2022.
EBIT excluding IMIs was down 41% year-over-year, to A$879.9 million from A$1.4.85 billion in FY2022. IMIs totaled A$880 million and included A$612 million related to the impact of commodity and foreign exchange movements, as well as A$144 million related to the closure of the Gibson Island manufacturing plant in January.
Full-year revenue was 5% lower than the prior-year, at A$6.01 billion versus A$6.32 billion.
“I’m pleased with our performance in the second fiscal half where strong underlying earnings growth was underpinned by our continuous focus on delivering leading technology and services for our customers,” said IPL Interim CEO Paul Victor. We end the period with significant momentum and start FY2024 on the front foot.”
Dyno Nobel Americas (DNA) reported a 27% decline in full-year EBIT, to $390 million from the year-ago $532.8 million. IPL cited a strong second-half performance in the Explosives business and improved reliability at the Waggaman, La., ammonia plant.
In contrast, Dyno Nobel Asia Pacific (DNAP) posted a 16% increase in EBIT, to A$188.3 million from A$162.5 million. IPL cited strong customer demand for DNAP’s premium technology, record production at the Moranbah ammonium nitrate plant in Queensland, and higher international earnings.
IPL’s fertilizers business, Fertilisers Asia Pacific, saw a 75% decline in full-year EBIT, to A$153.2 million from the year-ago A$613.7 million, missing the average analyst estimate of A$179.7 million (Bloomberg Consensus). Revenue declined by 17%, to A$2.20 billion from A$2.65 billion.
IPL said strong second-half fertilizer sales helped offset difficult trading conditions resulting from declining commodity prices. Domestic fertilizer sales volumes were up 9% year-over-year, to 2.04 million mt from 1.87 million mt, while total fertilizer sales volumes were up 5%, to 2.70 million mt from 2.58 million mt.
IPL noted that unplanned outages at the Phosphate Hill ammonium phosphate manufacturing plant in northern Queensland and higher gas costs negatively impacted the result, however. Gas supply outages at Phosphate Hill (GM June 9, p. 25) increased FY2023 gas costs by A$38 million.
Despite the outages, Phosphate Hill produced 17% more ammonium phosphates in FY2023, to 864,400 mt from 735,900 mt a year earlier, but was below the targeted 900,000-930,000 mt (GM June 9, p. 25). IPL said it has implemented a taskforce at the site to address and implement recommendations to improve reliability.
Victor said a potential buyer of IPL’s Fertilisers business had completed due diligence, but he did not comment on the identity of the buyer. There has been speculation that Indonesia’s PT Pupuk Kalimantan Timur (Pupuk Kaltim) is the preferred buyer (GM Sept. 15, p. 1) and, according to Australia’s Financial Review, is now negotiating over price.
Victor this week said a trade sale is “a high priority” provided that an acceptable price can be reached, and rejected suggestions that IPL might be squandering value by preparing to sell the business at a low point in the cycle, according to the Financial Review.
He cautioned, however, that a sale was not the only potential outcome, with IPL already having done a large amount of work to get its explosives and fertilizers arm ready for a structural separation after the plan was first announced in May 2022 (GM May 27, 2022).
With the sale of the Waggaman plant now expected to be completed in early December, IPL confirmed that it intends to return up to A$1 billion (approximately $650.8 million at current exchange rates) of the proceeds of the Waggaman sale to shareholders.
IPL also reconfirmed its commitment to completing the previously announced on-market buyback of up to A$400 million during permissible trading windows (GM Nov. 18, 2022). The company on Nov. 15 reiterated, however, that it is unable to start the buyback while a potential sale of the Fertilisers business is in progress.