For the third time in a year, fertiliser maker Incitec Pivot (IPL) has been forced to take a costly charge for a problem at its supposedly state-of-the-art Waggaman ammonia plant in the US.
IPL told the ASX on Tuesday that it will book a $173 million (US128 million) hit to its earnings before interest tax depreciation and amortisation (EBITDA) for the 2021-22 financial year (which ends in September).
The company said the problems would see a post-tax net profit hit of $A124 million (US92 million) for the latest round of problems which started two months ago. IPL says 75% of the financial hit will be felt in the six months to March.
Production at the 800,000 tonnes a year Waggaman ammonia plant in Louisiana, USA, was disrupted on February 18 this year 2022. IPL says production has now resumed.
Incitec managing director and CEO, Jeanne Johns said in Tuesday’s statement: “I would like to recognise the efforts of our dedicated workforce on the ground at the Waggaman plant for returning the plant to full production.”
“Our ability to make the necessary repairs as quickly and safely as possible would not have been possible without all the support we received from our engineering, design, and construction partners who provided the appropriate materials, labour, and expertise.”
Incitec will release its March half results on May 23, 2022.
The prospect of another loss from the US operation didn’t seem to worry investors – IPL shares closed 3.75% stronger at $4.15.
IPL is continuing to work with its insurers to progress a claim under the company’s comprehensive property insurance policy. IPL’s first half financial results will not include any adjustments for potential insurance recoveries.
In April last year the company said problems a that started at Waggaman in February, would be resolved by late April (There were actually two problems, one fixed by mid-March last year and then another mechanical problem that took another month to fix up. The cost was around $A80 million with a $A36 million hit to earnings before interest and tax for the September, 2021 financial year.
In late August last year, a hurricane shut the plant for a month. The plant’s temporary closure cost the company around $US28 million ($A38 million) in earnings before interest and taxes, or $US21 million ($A28 million) in net profit.
That’s a total cost from the incidents of more than $A280 million in around a year.
