Incitec Pivot profit sinks to $42m after Qld flood and US losses

Qld floods wash Incitec Pivot profits off the rails

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Flooding in north western Queensland left significant to the main rail corridor to the coast, including washing a freight train carrying zinc, lead and copper from the track.at Nelia.

Flooding in north western Queensland left significant to the main rail corridor to the coast, including washing a freight train carrying zinc, lead and copper from the track.at Nelia.

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Incitec Pivot's fertiliser and explosives business has reported $141 million in non-recurring events in its pre-tax earnings

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February's north western Queensland floods continue to take their toll, washing a big hole in Incitec Pivot's fertiliser balance sheet.

The international fertiliser and explosives producer has reported $141m in non-recurring events in its pre-tax earnings for the six months to March 31, including $60m associated with the loss of rail access to its Phosphate Hill site about 1000 kilometres south-east of Mt Isa.

A further $55m is expected to be written off for the second half of the year because of the flooding's impact on product movements from the mine.

After deducting about $141m in non-recurring events, and prior corresponding period impairments were stripped out, Incitec Pivot's profit for the first half of 2018-19 fell more than 70 per cent to $42m.

Earnings were lost on product sales which could not go ahead because the Queensland Rail line was closed between Townsville and Phosphate Hill.

In fact, repair crews only last month finished retrieving a Pacific National locomotive and 81 wagons which were caught on one section of track carrying zinc, lead and copper anode.

Part of the cargo tipped in floodwaters at Nelia, 60 kilometres east of Julia Creek.

While the first half result was impacted by some significant non-recurring events, we are making good progress with our strategic agenda - Jeanne Johns, Incitec Pivot

Incitec Pivot Limited (IPL) has also booked hits to its earnings before interest and tax (EBIT) of $20m at Phosphate Hill and $45m at its big ammonia plant in Louisiana, USA, plus a $16m earnings hit following a gas pipeline rupture at its St Helens ammonia site in Oregon, USA.

The company's Fertilisers Asia Pacific business declared a $33m loss after $80m of non-recurring events, down from a $23m profit for the same period last year.

Fertiliser division earnings before non-recurring events were actually up $24m largely due to weaker Australian currency exchange rates, rising commodity prices and "value chain optimisation", which more than offset impact of the drought in eastern Australia.

IPL is in the process of rationalising its Single Super Phosphates (SSP) manufacturing operations at Portland in Victoria, consolidating activities into the Geelong SSP manufacturing facility.

The Portland distribution centre will continue to serve customers as normal.

Jeanne Johns

Jeanne Johns

The company also reported good progress was being made in its acquisition of the Hong Kong-based the Quantum Fertilisers trading business, previously part owned by IPL.

"While the first half result was impacted by some significant non-recurring events, we are making good progress with our strategic agenda," said managing director, Jeanne Johns.

"The underlying market fundamentals remain strong and we have an improved outlook for the second half and beyond."

Meanwhile, discussions with third party suppliers continued to secure affordable gas for the Gibson Island ammonia plant in Brisbane through to 2022.

IPL has warned if it is unable to lock in an affordable gas deal, the site's manufacturing operations will close at the end of this year.

A decision on the talks' progress was expected "in the near term".

IPL will pay an interim dividend of 1.3 cents a share, unfranked, representing a payout ratio of 50pc of its net profit after tax.

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Ms Johns has forecast a full-year EBIT of between $370m and $415m, after deducting about $209m from non-recurring events.

She said US business continued to grow market share in the explosives, supported by its strategically located assets, quality client base and premium technology offering.

"I am pleased with the progress we have made re-contracting our explosives business in Australia, with our premium blasting technology playing an important role," she said.

"Sales volumes of our electronic initiating systems grew 98pc in Asia Pacific."

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