Incitec Pivot’s Limited (IPL) fertiliser earnings have taken a 67 per cent hit, but the big crop nutrient, industrial chemicals and explosives maker has lifted its half-year profit to $152.1 million.
Net profit after tax for the year ending March 31 increased 11pc on the same period last year.
Despite strong demand for fertiliser in Australia, Asia Pacific earnings were down $44.7m because of lower global prices, including a 19pc fall in diammonium phosphate (DAP) and a 4pc fall in urea values.
US urea prices were down by an average 9pc.
Domestic sales and marketing earnings before interest and tax fell 68pc on the same period in 2015-16 primarily because of the global price decline and a strengthening exchange rate against the US dollar.
Higher electricity prices at IPL’s Brisbane (Gibson Island) fertiliser plant cost the company $4.5m.
Managing director, James Fazzino, said the bullish overall business result was largely due to IPL’s transformation from a fertiliser co-operative to a global diversified industrial business and its ability to address cyclical and structural changes in the resources and fertiliser markets.
Mr Fazzino, who is due to step down from his role later this year, said well above average demand for fertiliser in the past six months was expected to continue into the second half of IPL’s trading year.
Encouraging agronomic conditions and improved water storage levels were underpinning sales.
He said spot prices for urea products at the end of March were above those averaged by IPL in the second half of 2015-16.
Solid construction and quarry demand in the US lifted explosive business earnings before interest and tax jumped 24pc in North America , while Asia Pacific earnings rose 4pc underpinned by coal and base metal mining activity
A contribution from the company's new Louisiana ammonia plant more than offset low fertiliser prices.
Commenting on the soaring cost of gas for domestic industrial businesses in Australia, Mr Fazzino said IPL had warned six years ago about the looming Australian energy crisis.
“In November 2015 we took action to secure new gas supply from a new supplier for our Phosphate Hill plant in western Queensland,” he said.
“The 10-year contract, which will commence on completion of the Northern Gas Pipeline in late 2018, will result in a $55m a year reduction in gas costs compared to the gas costs at the time of the announcement.
“We continue to look at options for Gibson Island and are participating in the Queensland government’s innovative tender process.”
He said the Queensland government had developed an initiative which had potential to bring new sources of gas, new gas producers and economic gas to sustain the state’s gas users in a timely manner, although the process was in its “nascent stages”.
“Federal government action to put Australian gas customers first has potential to provide a bridge between current contracts and new gas supply.”
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
