FERTILISER business Incitec Pivot suffered hefty losses on the share market following a weather-inspired disappointing half year result.
The company this week announced a decline in first half earnings to $361.9 million, which was well below market expectations.
Shares slumped 7.8 per cent following the news to sit at $2.94 on Thursday morning, with an earnings drop of 58pc in the fertiliser arm of the business overshadowing a 42pc gain in the explosives sector.
A complex range of factors, including soaring global gas, and by extension urea, values and Australian flooding, along with declining demand have all contributed to the fall.
While the company has been working hard in recent years to help insulate itself from the boom and bust earnings cycle common in agribusiness it remains susceptible to vagaries in weather.
Locally, the heavy rain across the east coast last year meant lower sales, particularly of nitrogen-based fertilisers applied in crop, while Incitec's American business arm was hit hard by a wild winter which slowed farm operations down.
The company had its normal high inventory levels of fertilisers locally in the first half, but this was exposed to a drop of $590 a tonne from September to March, hurting the company's bottom line.
IPL managing director Jeanne Johns put a positive spin on the result, saying the company had seen a resilient performance in light of the market conditions.
"There is strong strategic momentum," she said.
The variability of earnings in the fertiliser business, which saw record global values for phosphorus and nitrogen based fertilisers in the middle of the year before a sharp slump over the past nine months, continues to plague IPL's plan to split the explosives and fertiliser arms of the business.
Locally, Ms Johns said there had been a number of highlights in the fertiliser business, in particular an exclusive off-take agreement with WA-based fertiliser manufacturer Perdaman for up to 2.3 million tonnes a year of urea.
"The agreement is expected to add approximately $45 million to earnings before interest and tax," Ms Johns said.
The company has also signed a long-term gas supply agreement at Moranbah in Central Queensland which will run until 2037, which will be used for supply to its ammonium nitrate plant.
The company also announced the closure of its Gibson Island facility in Queensland had proceeded as planned in January.