High dollar and lower prices blow hole in Incitec profit
The global explosives and fertiliser maker's net profit fell by almost a third to $372 million.
Chief executive James Fazzino said the company had been affected by several factors, including a decline in global fertiliser prices and a fall in demand for explosives sold into the resources industry.
"In the face of these external challenges the business delivered strong operating cashflows and increases in underlying earnings in the global explosives business," he said.
Incitec shares rose 7.3 per cent to $2.80, with investors cheering better-than-expected cashflow of $615 million.
The company warned in July that earnings would be affected by problems at its Phosphate Hill fertiliser plant. It said on Tuesday it would be forced to shut the plant at several points next year, reducing forecast production and weighing on 2014 earnings.
Incitec Pivot, which manufactures nitrogen-based fertilisers used on crops around the world, has tried to position itself to benefit from the rising demand for food in Asia. But on Tuesday it said its fertiliser business had slumped, with earnings before interest and tax falling 37 per cent.
This was due to plant outages and a decline in global fertiliser prices, which would continue to affect earnings in the current year.
"Our immediate focus is to continue to execute on strategy through maximising returns from our current businesses," Mr Fazzino said.
The company's dividend fell to 9.2¢ per share from 12.4¢ a year earlier.
It said it remained cautious about its outlook for the current financial year, warning it did not expect significant improvement in its explosives markets.
However, it said it would benefit from a lift in production at its Moranbah, Queensland, site as well as improved conditions in the US economy for the mining and construction sectors.
Sales revenue fell to $3.4 billion, from $3.5 billion a year earlier.
Frequently Asked Questions about this Article…
Incitec Pivot's profit declined due to a strong Australian dollar, a slowdown in the mining sector, a decline in global fertiliser prices, and reduced demand for explosives in the resources industry.
The strong Australian dollar negatively impacted Incitec Pivot's earnings by making its products more expensive on the global market, contributing to a decline in profit.
Incitec Pivot faced challenges in its fertiliser business due to plant outages and a decline in global fertiliser prices, which led to a 37% fall in earnings before interest and tax.
Despite profit challenges, Incitec Pivot delivered strong operating cashflows, with better-than-expected cashflow of $615 million, which was positively received by investors.
Incitec Pivot remains cautious about its explosives market outlook, not expecting significant improvement, but anticipates benefits from increased production at its Moranbah site and improved US economic conditions.
Incitec Pivot's dividend fell to 9.2 cents per share from 12.4 cents a year earlier, reflecting the company's cautious outlook and profit decline.
Amid current challenges, Incitec Pivot is focusing on maximizing returns from its existing businesses and executing its strategy to navigate external pressures.
The decline in Incitec Pivot's sales revenue, which fell to $3.4 billion from $3.5 billion, was influenced by reduced demand in the mining sector and lower global fertiliser prices.
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