As expected, it was a miserable interim result for Incitec Pivot thanks to unexpected and very expensive plant outages at a major plant in the US state of Louisiana.
The company saw revenue down by 6.7% – or $123.8 million – to $1.72 billion in the six months to March 31, which in turn slashed net profit by 43.7% to $36.4 million.
The fall in revenue was driven by a 13% reduction in Dyno Nobel Americas revenue to $671.1 million and a 7% decline in Dyno Nobel Asia Pacific (APAC) revenue to $455.8 million. This offset a 2% lift in Fertilisers APAC revenue to $628.3 million.
Despite the profit slump, directors have returned the company to dividends – a one cent a share payment (which will absorb $19.4 million of the after-tax result). The company didn’t pay any dividends in 2019-20 and the last payment to shareholders was the final for 2018-19.
The shares fell 6% to $2.21 before struggling back to end the day down 1.66% at $2.37.
The result was hit by a weak manufacturing performance in the US, though solid underlying explosives and fertilisers businesses were backed by resilient resources and agricultural sectors, especially on the Australian east Coast with the breaking of the drought.
“Pleasingly, our fertiliser business returned to profit during the half as we responded to stronger seasonal outlook for rain and commodities,” chief executive Jeanne Johns said in a statement with the results.
“As we progress our strategy to become a soil health company, good rainfall events across eastern Australia position us well to deliver for the agricultural sector in the second half.”
Unplanned outages across a number of its US operations knocked $14 million from Incitec’s half-year earnings, while planned outages delivered another $59 million hit.
Last week the company flagged the Waggaman plant near New Orleans was again offline due to technical issues.
Ms Johns said “While the Waggaman plant has demonstrated it’s capable of very good production runs, the recent issues at our plant are clearly disappointing and our expert taskforce is working hard to get the plant back up and running at nameplate.”
Incitec says bringing the plant back to full operation was its highest priority, with all appropriate internal and external resources being deployed to achieve this.
“Based on current information, repairs and re-start are expected to take two to three weeks,” the company told investors last week.
The additional impact to FY21 earnings before interest and tax from the first missed restart of the plant is estimated to be between $33 million and $42 million, or $26 million and $33 million on a net profit after-tax basis.
It said it expected a stronger than normal weighting to second-half earnings and cash flow.
