Incitec Pivot Ltd. (IPL), Southbank, Australia, reported a 91 percent increase in net profit after tax (NPAT) to A$358.6 million, excluding individually significant items (IMIs), for the year ended Sept. 30, 2021, beating the average analyst estimate of A$295.8 million, according to a Bloomberg Consensus (range A$196.0 million to A$391.0 million).
Statutory FY2021 NPAT including IMIs was up 21 percent, at A$149.1 million. EBIT before IMIs increased by 51 percent, to A$566.4 million, while revenues grew 10 percent year-over-year, to A$4.35 billion.
IMIs totaled A$209.5 million after tax and included an A$79.4 million after tax (gross: A$107.4 million) non-cash impairment of the Cheyenne, Wyo., manufacturing assets and an A$58.4 million after tax (gross: A$83.5 million) cash cost for the planned closure of the Gibson Island, Brisbane, manufacturing plant at the end of calendar 2022, and an A$71.7 after tax (gross: A$102.5 million) non-cash impairment of the Gibson Island assets. The plans for the Gibson Island closure were announced last week (GM Nov. 12, p. 1).
While the forecast costs of the closure of the Gibson Island plant have been included as an IMI in the FY2021 results, the majority of the cash costs associated with the closure are expected to be incurred in FY2023, the company said.
FY2021 was also a heavy period for turnarounds, with the impact of COVID-19 causing some activity to be deferred from FY2020 to FY2021. The four turnarounds undertaken during the year (Mt. Isa, and Moranbah, Queensland; St. Helens, Ore.; and Waggaman, La.) had a negative impact on earnings of A$122 million. The results were also impacted by an A$79 million hit from unplanned outages, primarily in North America.
“The strong full-year results reflect the strength of the second half, with strong pull through from technology in explosives and a recovery in our end markets, as well as our Fertilisers business capturing the upswing in commodities prices,” said IPL Managing Director and CEO Jeanne Johns.
Selected financials for year ended Sept. 30
| A$ million | 2021 | 2020 | % change |
| Revenue | 4,348.5 | 3,942.2 | +10 |
| EBIT excluding IMIs | 566.4 | 374.5 | +51 |
| NPAT excluding IMIs | 358.6 | 188.2 | +91 |
| IMIs after tax | (209.5) | (64.8) | (223) |
| Statutory NPAT | 149.1 | 123.4 | +21 |
| Cents per share | 18.5 | 10.9 |
IPL’s Dyno Nobel Americas (DNA) reported an 18 percent fall in FY2021 EBIT, down to US$189.9 million from the year-ago US$230.8 million. Revenue increased 5 percent, to US$1.59 million from US$1.51 million the previous year.
The business segment’s EBIT took a big hit from an extended turnaround and unplanned outages at its Waggaman operation during the fiscal year. Waggaman’s EBIT was just US$3.6 million in FY2021, versus the prior year US$32.4 million.
As previously reported, the FY2021 turnaround of the ammonia plant impacted earnings by US$58 million, while the outage related to the shutdown ahead of Hurricane Ida and a minor hurricane-related outage earlier in the year was US$21 million. Excluding the impact of the planned turnaround and adverse weather events, additional unplanned outages had a negative earnings impact of US$19 million.
Waggaman produced 437,200 mt of ammonia in FY2021 (FY2020: 729,000 mt), 40 percent less year-over-year, while sales of ammonia from the plant were 23 percent lower on the year, at 563,500 mt (FY2020: 730,000 mt). The company replaced shortfalls in produced ammonia by third-party supplies.
Post turnaround and post the outage from Hurricane Ida, the company said the plant has been operating reliably and in line with its 800,000 mt/y nameplate capacity. IPL said it expects the plant to continue to run at nameplate capacity in FY2022.
However, as previously disclosed by the company, the replacement of the cooler at the plant will be required in the next 6-18 months. An outage of up to three weeks is expected during FY2022 or FY2023 to allow for installation. The company emphasized that to date, the cooler has performed “with no signs of deterioration.”
DNA’s Agriculture & Industrial Chemicals’ (Ag & IC) EBIT jumped to US$10.9 million, up from US$1.3 million in FY2020, while revenues increased 6 percent to US$133.5 million. FY2021 earnings were negatively impacted by US$11 million due to a planned outage at the St. Helens plant, minor production issues, and additional depreciation.
Urea and ammonia production from St. Helens fell 19 percent and 16 percent, respectively, mainly due to the planned turnaround.
Regarding manufacturing performance elsewhere in the Explosives and Ag & IC businesses in FY2021, nitric acid production at the Louisiana, Mo., plant decreased 14 percent due to an unplanned outage caused by a blade failure on the axial compressor.
Cheyenne ammonia output was down 5 percent year-over-year due to an unplanned outage caused by a bearing failure on the reciprocal compressor, but nitric acid production increased by 4 percent.
The A$107.4 million before tax non-cash impairment of the Cheyenne plant noted above is related to the impact on the plant of the further structural decline in thermal coal markets. It specifically relates to the operation’s nitric acid utilization rates. IPL plans to reconfigurate the plant to reduce nitric acid production capacity in line with lower market volumes.
A planned turnaround at Cheyenne in the second half of FY2022 is expected to result in 6-8 weeks of lost production.
IPL’s Fertilisers Asia Pacific posted a big jump in EBIT in FY2021, reaching A$268.4 million, up from the year-ago A$26.2 million. Revenue increased by 26 percent, to A$1.89 billion against A$1.50 million a year earlier.
Sales volumes grew 3 percent to 3.22 million mt, up from FY2020 sales of 3.14 million mt, and, according to the company were the highest sales volumes since 2005. The company cited generally favorable agronomic conditions, with La Niña rain events increasing soil moisture and water storage levels as driving the increase.
In terms of production, ammonium phosphates output at Phosphate Hill, Queensland, decreased 2 percent, to 958,400 mt from the previous year’s 979,300 mt, mainly due to the planned shutdown at Mt. Isa, which impacted the supply of sulfur. Plant reliability for the year was 96 percent, an improvement of 3 percent over the prior year.
A planned turnaround at Phosphate Hill in the second half of FY2022 – starting in May – is expected to result in 6-8 weeks of lost production. The operation is expected to run at 90 percent of nameplate capacity through to the May turnaround, and at 100 percent nameplate capacity thereafter. Gibson Island is expected to produce at rates in line with FY2021.
The Gibson Island plant in Brisbane, Queensland, produced 498,500 mt of urea equivalent product, up 24 percent on the year-ago 400,500 mt. The company cited most of the improvement as due to FY2020 being impacted by a planned major turnaround at the plant.
IPL last week announced that it will cease manufacturing at the Gibson Island plant at the end of December 2022 due to a failure to secure “an economically viable” long-term gas supply to its plant beyond its current supply contract, “despite extensive efforts.” The current contract with Australia Pacific LNG, which started in April 2020, expires on Dec. 31, 2022.
As noted above, the company said the majority of the cash costs associated with the closure (A$58.4 million after tax) are expected to be incurred in FY2023. IPL’s Brisbane fertilizer distribution center capability will continue beyond the closure of the manufacturing operations.
The Dyno Nobel Asia Pacific (DNAP) business posted a 6 percent decline in FY2021 EBIT, to A$140.2 million, while revenue was also down 6 percent, at A$937.8 million.
IPL cited an A$15 million impact from the Moranbah plant turnaround in May and the impact of a A$12 million decrease in contract renewals, among other factors, as negatively affecting earnings. This was partly offset by a A$12 million increase from technology growth compared to a year-ago, and an A$9 million increase as a result of cost savings, mainly across the commercial business and the Moranbah plant.
Allowing for the impact of the planned turnaround, the Moranbah plant produced 346,500 mt of ammonium nitrate (AN) in FY2021 versus 371,300 mt a year-ago, while sales of AN were 10 percent lower on the year at 683,700 mt, down from 762,600 mt.
In the outlook for FY2022, IPL sees the impact from turnarounds at about A$76 million, plus a depreciation increase of about A$22 million (FY2021: A$122 million plus an A$79 million hit from unplanned outages).
IPL expects strong second-half cash generation to continue in FY2022.
“Looking ahead, as we enter FY2022 we are well positioned to benefit from the continued execution of our strategy, as we invest in and grow our two strong base businesses in explosives and fertilizers and capture the strength in commodity pricing,” said Johns.
IPL has declared a final dividend of 8.3 Australian cents per share 14 percent franked, representing a 50 percent pay-out ratio of NPAT, excluding IMIs.