Incitec Pivot is heading for a miserable 2018-19, especially for the first half to March 31.
In late January the company warned that problems at its plants in Louisiana and Phosphate Hill in western Queensland was expected to have a $45 million impact on earnings before interest and tax for the year to September 30.
The US plant problems would have a cost of around $A20 million, the Phosphate Hill problems a further $25 million.
Then monsoon-like rains hit northern and western Queensland earlier this month damaging the rail line between Phosphate Hill/Mount Isa and Townsville on the coast.
IPL issued a statement on February 11 saying it “currently estimates that the impact of the rail closure will give rise to lost earnings before interest and tax (EBIT) of approximately A$10m per week from 9 February 2019 until the resumption of full production.”
Yesterday the impact expanded dramatically to between $100 and $120 million off the EBIT as IPL told the ASX that Queensland Rail had told it that it expects the rail line between Phosphate Hill and Townsville to reopen between late April and mid-May 2019.
“Having regard to its anticipated mitigants and based on the current advice provided by Queensland Rail, IPL estimates that the outage will give rise to aggregate lost earnings before interest and tax (EBIT) of approximately A$100-120 million.
“IPL has taken, and will continue to progress, measures to mitigate the impact of the rail closure on its operations, including the transportation of a limited amount of product by road.
The flood damage to the 1,000-kilometre rail line has disrupted zinc copper and other shipments from major producers such as Glencore, would be fixed sooner than it had expected.
But the new timetable from Queensland Rail indicates the line could be repaired more quickly than previously thought – three months or so instead of five to six months.
But the losses are going to seriously damage IPL’s returns. It means revenues will fall short for the first half and the full year if the outage lasts three months which takes the delays into the second half of the company’s financial year starting April 1.
IPL reported revenues of $3.856 billion – the problems will see a shortfall in this area. Net profit after one-off items (a net $139.5 million after the $236 million impairment of the company’s Moranbah explosives plant) fell 34% to $208 million, while before one-off items EBIT rose 11% to $557 million and including one-offs, was up 9% at $347 million.
For March 31, 2018, half year the company’s revenue was $1.683 billion, up 9.6% and earnings after tax and before one-offs was $147 million (and $73 million including one-offs) and $240 million on an EBIT basis.
The problems from the floods in Queensland and the earlier losses at Phosphate Hill and in the US could lop more than $180 million off EBIT for the full year and a good part of that for the half year.
That threatens the interim dividend at least of 4.5 cents a share. Unlike last year’s impairment, which was a non-cash cost, these latest problems represent actual cash not coming into the company – IPL’s debt will rise sharply – net debt was just over $1.3 billion at the end of September last year.
IPL shares ended down 2% at $3.32 after being down more than 4% at the opening.
