As expected a combination of factors from drought, flooding rains higher gas prices and plant outages drove net earnings of Incitec Pivot (IPL) down 56% in the year to September 30.
As a result, the company has slashed dividend from 10.4 cents for the year 4.7 cents a share, with the payment of a 3.4 cents a share final, 30% franked.
Net profit for the year totalled $152.4 million down from $347.4 million in 2017-18.
On an EBIT (earnings before interest and tax) basis the company lost $79.7 million.
The fertiliser business arm, which produces fertilisers widely used in agriculture, was hurt by a rail outage earlier this year after heaving rains and floods in February cut the line between Mount Isa and Townsville.
The outage severely disrupted and delayed transport of Incitec Pivot’s products from its Phosphate Hill plant in Queensland to the coast, and was the key contributor of $148 million of non-recurring items confirmed by Incitec yesterday (but warned about during the year).
Earnings in this division were also hit by intensifying drought, as many farmers significantly cut back, or stopped, sowing crops; consequently cutting demand for Incitec Pivot’s fertilisers.
The company said higher gas prices on the east coast delivered a $43 million “net adverse movement” on its fertiliser business earnings.
Earnings from its US operations did better than in Australia, with its Dyno Label Americas business contributing EBIT of $234 million, down from $278.6 million in 2017-18.
“While financial year 2019 has been a challenging year with a number of non-recurring items impacting our result, the fundamentals underpinning our Explosives businesses in the Americas and Asia Pacific remain strong,” said Incitec Pivot chief executive Jeanne Johns
The Dyno Nobel Asia Pacific saw EBIT (excluding one-off items) fall to $179.2 million from $205.4 million the year before, “ largely due to the $20m impact from previously announced re-basing of customer and supply contracts.”
“The fundamentals underpinning the Australian explosives market remain strong, with accelerating adoption of technology by the mining industry driving strong demand for electronic detonation and delivery systems. The Moranbah plant performed strongly with 2H19 production a record result,” directors said.
Directors said the strategic review of the fertilisers business is progressing, with a decision to sell, demerge or retain and invest, to be made in in 2020.
IPL shares fell 1.7% to $3.53.