Australia's Incitec Pivot plans major plant shutdown, profit falls

12 November 2013 12:35  [Source: ICIS news]

LONDON (ICIS)--Leading Australian fertilizer and explosives producer Incitec Pivot Ltd (IPL) on Tuesday posted a 27% fall in annual net profit from the previous year as it reflected on a "challenging 2013" and announced a "major" shutdown at its key Phosphate Hill manufacturing facility in Queensland in second-quarter 2014.

Full-year net profit fell to A$372m ($346.6m, €259.5m) from A$510.7m in 2012, the Melbourne-headquartered company announced, adding sales revenue slipped 3% to A$3.4bn from A$3.5bn in the year prior.

IPL managing director and CEO, James Fazzino, said the result reflected a year when IPL continued to drive the medium-term growth strategy while managing through challenges impacting profitability.

External factors that impacted its bottom line included a "high Australian dollar, low global fertilizer prices and a decline in demand for explosives sold into the resources industry".

"During the year, we established our medium-term growth platform with the ramp-up of production at the Moranbah ammonium nitrate (AN) plant in Queensland's Bowen Basin and the commencement of construction of a world scale ammonia plant in Louisiana, USA," Fazzino said.

"Our immediate focus is to continue to execute on strategy through maximising returns from our current businesses and to deliver on our core manufacturing expertise through safe and sustained operation of our production plants globally, including Moranbah."

Looking to the future, Fazzino said that Dyno Nobel Asia Pacific (DNAP) would continue to benefit from the ramp-up of production at its plant at Moranbah, which is anticipated to produce 300,000 tonnes of AN in 2014.

"In Dyno Nobel Americas (DNA), we are expecting moderate earnings growth as the metals and mining and quarry and construction sectors continue to improve over time with the strengthening US economy.

"In Incitec Pivot Fertilisers, we expect similar sales volumes with earnings subject to global fertilizer price movements. At Phosphate Hill, two maintenance turnarounds - a 16 day shut in October/November 2013 and a 35 day shut in May/June 2014 - will prepare the plant for sustainable production."

IPL revealed that its Phosphate Hill facility, which produces several types of fertilizers including ammonia and diammonium phosphate (DAP), is being "run conservatively in the months before the May/June 2014 shut ... focused on the sulphuric acid, phosphoric acid and ammonia plants".

The firm's world-scale sulphuric acid plant, which is located at Mount Isa around 100 miles from Phosphate Hill, produces the essential ingredient for the manufacture of DAP and monoammonium phosphate (MAP).

The company estimates combined shut related capital of approximately A$95m for the two shuts, with Phosphate Hill is expected to produce 830,000 tonnes of fertilizers in 2014.

It added no similar maintenance is planned for its Gibson Island plant in Brisbane, Queensland, which has capacity to manufacture 300,000 tonnes/year of ammonia, 280,000 tonnes/year of urea and 200,000 tonnes/year of ammonium sulphate (AS).

Turning to the progress of the construction of its $850m ammonia plant in the US, IPL said the project is on budget and on schedule to produce its first nitrogen-based fertilizer in third-quarter 2016.

The plant will produce 800,000 tonnes/year of ammonia, of which 300,000 tonnes/year will go to major international trader Transammonia (Trammo) after the pair agreed an offtake agreement.

DNA will receive 300,000 tonnes/year from the brownfield site at Waggaman, while the remaining 200,000 tonnes/year will go to Cornerstone Chemicals Company, on whose land the plant will be situated.

(A$1 = $0.93, $1 = €0.75)

By: Richard Ewing
+44 208 652 3214

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