Fertiliser earnings were up, but Incitec Pivot has posted a 44 per cent slump in its overall half year net profit to $36.4 million largely due to supply chain and production problems in its international explosives business.
Australia's biggest fertiliser maker and the world's second biggest explosives company enjoyed the benefit of generally favourable seasonal conditions in its Australian cropping and grazing sector marketplace, with good farm commodity prices helping to drive demand.
However, its Dyno Nobel Americas explosives business posted pre-tax earnings of just $31m, down from $113m a year earlier, mostly because of shutdowns and production delays in Wyoming, Missouri, Oregon and Louisiana.
Its relatively new Waggaman ammonia plant in Louisiana suffered a series of unexpected and extended repairs which resulted in a 200pc fall in pre-tax earnings at the site.
Fertiliser turnaround
Fertiliser earnings for the six months to March 31, before interest and tax, returned a $20m profit, bouncing back after last year's $10m loss.
While the Fertilisers Asia Pacific division's total sales volumes of 1.25m tonnes were actually slightly down on the same period in 2019-20 because of COVID-19 related distribution constraints overseas and too much March rain in parts of Queensland and NSW, fertiliser earnings benefited from a 45pc increase in global ammonium phosphate prices.
Based on current prices Incitec Pivot calculated it would make a profit of more than $25m on a stockpile of excess manufactured product when this sold in the current half year period.
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The company said improved weather conditions in eastern Australia meant many cropping and pasture districts recorded above average rainfall and much healthier soil moisture levels in most regions.
Forecasts suggested average rainfall for the current winter cropping season, which would continue driving fertiliser usage.
Good irrigation water availability to cotton growers would lift demand for liquid fertilisers and BigN ammonia gas during the coming spring and summer.
In general, the company expected stronger second half earnings.
Managing director Jeanne Johns said the first half year's results did not reflect Incitec's underlying performance, with the group set to deliver strong results as market conditions improved and favourable commodity prices would help, too.
"Importantly our Australian manufacturing plants have ensured fertiliser supply to Australian farmers during COVID times, demonstrating the vital role of local manufacturing in domestic supply chain security," she said.
"As we progress our strategy to become a soil health company, good rainfall events across eastern Australia position us well to deliver for the agricultural sector in the second half."
The company continued to aspire to net zero carbon emissions as soon as practicable and had evaluated emission sources and identified emission reduction technologies.
"We will continue to identify new technologies such as sola hydrogen and carbon capture and storage for technical and commercial readiness," Ms Johns said.
Earlier this month Incitec signed a urea offtake agreement with West Australia's Perdaman Chemicals and Fertilisers, committing to buying up to 2.3m tonnes of granular urea fertiliser a year.
Although the Perdaman plant at Karratha is still to be built or have gas supply contracts confirmed, Incitec said the agreement provided it with the opportunity to secure a competitive, long-term domestic urea supplies to sell locally and in its growing global markets.
Ms Johns said Perdaman's world-scale plant would be one of the most energy efficient of its type, utilising low emissions technology.
"We are pleased to support such a significant domestic manufacturing project, using Australian gas to produce urea fertiliser, essential for our Australian and international agricultural markets."
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