Directors of Incitec Pivot (IPL), the fertiliser and explosives group lifted interim payout to shareholders to 4.5 cents a share for the year to March 31, from the 4 cents a share paid the year before when the result was hit with more than $105 million of impairments and write downs.
The modest rise enabled the board to maintain the commitment to a payout ratio of 50% of net profit. The company reported a net profit of $152.1 million in the six months through March, up from $31.5 million a year earlier (hit by the impairment costs).
After stripping out those one-off items, half-year profit rose by a more modest 11% off the back of a less than 1% rise in revenue to $1.54 billion, against $1.52 billion previously.
Incitec’s US assets delivered just over half the company’s earnings before interest and tax, and the US industrial chemicals division was the biggest improver, increasing its contribution to group earnings before interest and tax by $61.4 million.
The industrial chemicals division was boosted by first production at the Waggaman ammonia plant in Louisiana, which is set to continue ramping up production in the second half, and a $US35.1 million payment from a contractor for the late delivery of the Louisiana plant.
The Waggaman Louisiana facility can produce 800,000 tonners a year of ammonia at peak capacity and contributed earnings of US$10.8m in from October to the end of March. The US explosives division also reported improved earnings thanks to the quarrying and construction industries, and that strong performance helped to offset weakness in Incitec’s fertiliser business, which performed poorly in Australia.
The company said a 67% slump in profit in the division reflected global fertiliser prices that were well below long-term trend.
“The strategy we announced previously remains intact, namely a period of consolidation, with a combination of balance sheet de-levering and increasing returns to shareholders,” Chairman Paul Brasher said on Tuesday.
The company’s shares rose 2.9% to close at $3.80. That’s a rise of 46 cents or a rise of just over 1.3%. The ASX 200 is up just over 8.6% in the same time.
