Production problems take a bite out of Incitec Pivot second-half profits

Incitec Pivot has warned of a $23.5 million hit to its second-half profit following production problems at its Phosphate Hill fertiliser plant which have resulted in lost output of about 180,000 tonnes.

Incitec Pivot has warned of a $23.5 million hit to its second-half profit following production problems at its Phosphate Hill fertiliser plant which have resulted in lost output of about 180,000 tonnes.

Production of ammonium phosphates at the plant is expected to fall to 400,000 tonnes in the second half, restricting year to September output to 763,000 tonnes. This is well short of expected output of closer to 950,000 tonnes for the full year.

It follows problems at the group's Mount Isa plant earlier this year which resulted in four weeks of lost production, with a cost of about $25 million to rectify.

"Following the unplanned outage at Mount Isa earlier in this financial year, a detailed study was undertaken and the root cause was found to lie in the 2010 turnaround for Phosphate Hill and Mt Isa operations," Incitec chief executive James Fazzino said.

As a result, a review of the group's manufacturing is being finalised with a specific focus on its maintenance programs, he said. These plants are on a four-year maintenance cycle, and the emergence of two sets of problems following the last fixes prompted the review.

In the year to September 2012, Incitec Pivot earned a net profit of $405 million. Analysts forecast a net profit of about $320 million this financial year due to a downturn in fertiliser prices, along with lower resources sector demand, before the earnings hit, which was disclosed on Tuesday.

The woes at Incitec Pivot follow a profit warning from Orica last week due to the downturn in resource sector demand. It now expects a net profit down 10 per cent from the $650 million it earned last financial year.