Incitec Pivot’s fertiliser business heads for foreign control

Yet another Australian manufacturing operation is heading for foreign control with fertiliser and explosives business Incitec Pivot confirming it was negotiating the sale of its fertiliser manufacturing to an Indonesian company.

IPL’s CEO & Managing Director Mauro Neves told investors the company had continued to progress the structural separation of its fertiliser and explosives businesses.

Neves said: “We are in advanced negotiations for a potential sale of our fertilisers business to PT Pupuk Kalimantan Timur, who are a major fertilisers producer in Asia and current supplier of urea to Australia.

“Our aim remains to achieve appropriate value for the IPF business for our shareholders and stakeholders.”

Neves said the company was focused on concluding the sale process as soon as possible.

Meanwhile Incitec Pivot has on hold a proposed on-market share buyback of up to $900 million – essentially a return of capital to shareholders and an admission the business has no better use for the capital.

The company has already returned $500 million in capital to investors.

Incitec Pivot’s problems are partly of its own making and partly the result of a underperforming foray into the US market – particularly the construction of an ammonia plant at Waggamnan, Louisiana.

Waggaman has been plagued by breakdowns and shutdowns costing hundreds of millions of dollars to fix, with the company’s sale of the business resulting in an impairment of $312 million reported in its latest results relating primarily to a non-cash impairment of the fertilisers business, partially offset by a gain on the sale of Waggaman.

As a result the company’s Fertilisers Asia Pacific EBIT of $10 million for 1h24 compares to $108 million in the previous corresponding period.

This result was also impacted by the closure of its Gibson Island, Brisbane production facility because the company was unable to source reasonably priced gas over a reasonable timeframe.

The bottom line was that Incitec Pivot reported a net loss after tax including individually material items of $148 million for the half, compared to a $354 million profit for the previous corresponding period.

“The principal driver of the reduced earnings relates to the discontinuation of Waggaman (sold on 1 December 2023) and the closure of fertiliser manufacturing at Gibson Island, Queensland.”

This equates to a return on Invested Capital including goodwill (ROIC) of 5.1 percent, down from 12.8 percent the previous year.

The bright spark remaining is the Dyno Nobel explosives business which reported US earnings of US$56 million, an increase 12 percent.

Dyno Nobel Asia Pacific reported an EBIT of $108 million, up from $79 million.

“The business continues to see steady uptake of Dyno Nobel’s premium technology suite, particularly electronic detonators and Differential Energy emulsions.”

Cold comfort for a company that once had multi industry international ambitions.

Further reading:
Incitec Pivot sells troubled Waggaman plant
Incitec Pivot fails to secure gas supplies, to close Gibson Island

Picture: Incitec Pivot