Incitec blames dollar for slump

Incitec Pivot has blamed the strong Australian dollar and the slowdown in the mining sector for a slump in its full-year profit.
By · 13 Nov 2013
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13 Nov 2013
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Incitec Pivot has blamed the strong Australian dollar and the slowdown in the mining sector for a slump in its full-year profit.

The global explosives and fertiliser maker's net profit fell by almost a third to $372 million, compared to $510.7 million in 2012.

Chief executive James Fazzino said the company had been affected by several factors, including the strong local currency, 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 cash flows and increases in underlying earnings in the global explosives business," he said.

Despite the hit to profit, investors pushed Incitec shares up 7.3 per cent to $2.80, with investors holding on to better-than-expected cash flow of $615 million.

The company warned in July that its earnings would be affected by ongoing problems at its Phosphate Hill fertiliser plant.

It said on Tuesday it would be forced to shut down the plant at several points during 2014 in order to prevent plant damage, reducing its forecast production for the year and weighing on the company's 2014 earnings.

Incitec Pivot, which makes nitrogen-based fertilisers used on crops around the world, has tried 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 the decline in global fertiliser prices, which would continue to have an impact on earnings in the current year, it said. "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 anticipate significant improvement in its explosives markets.

However it said it would benefit from a lift in production at its Moranbah, Queensland, site in 2014 as well as improved US conditions in mining and construction sectors.
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