Production problems take a bite out of Incitec Pivot second-half profits
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.
Frequently Asked Questions about this Article…
Incitec Pivot reported production problems at its Phosphate Hill fertiliser plant that have resulted in lost output of about 180,000 tonnes of ammonium phosphates and a $23.5 million hit to second-half profit.
Production of ammonium phosphates at Phosphate Hill is expected to fall to 400,000 tonnes in the second half, restricting year‑to‑September output to about 763,000 tonnes versus an expected full‑year level closer to 950,000 tonnes.
Yes. Earlier this year the group's Mount Isa plant experienced problems that caused four weeks of lost production and cost about $25 million to rectify.
Incitec Pivot said a detailed study found the root cause lay in the 2010 turnaround for the Phosphate Hill and Mount Isa operations. That finding has prompted a manufacturing review focused on maintenance programs.
The company is finalising a review of its manufacturing with a specific focus on maintenance programs. The article notes these plants operate on a four‑year maintenance cycle and the emergence of two sets of problems after the last fixes prompted the review.
The firm disclosed a $23.5 million hit to second‑half profit from the Phosphate Hill outage. Analysts had already been forecasting a weaker year — around $320 million net profit for the financial year — after a downturn in fertiliser prices and lower resources sector demand.
Incitec Pivot earned a net profit of $405 million in the year to September 2012. Analysts were forecasting about $320 million net profit for the current financial year before the additional earnings hit from the outages was disclosed.
The article places Incitec Pivot's issues in a wider context: it follows a profit warning from rival Orica last week due to a downturn in resource sector demand. Analysts also cited weaker fertiliser prices and lower resources demand as headwinds for the industry.
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