Australia's Incitec Pivot signs 23-month gas supply agreement

19 December 2013 12:08 Source:ICIS News

BRISBANE (ICIS)--Leading Australian fertilizer and explosives producer Incitec Pivot Limited (IPL) on Thursday announced the signing of a 23-month gas supply agreement for its Phosphate Hill plant in Queensland that will increase its manufacturing costs.

In a short statement accompanying its AGM presentations, the Melbourne-based business said the gas agreement would start in February 2015 and increase its production costs by A$50m ($44.3m, €32.3m) per year in 2015 and 2016. The terms of the agreement were not disclosed.

IPL chairman Paul Brasher told shareholders access to competitively priced raw materials remains a key challenge for the company.

"While we have signed a new 23-month gas supply agreement for Phosphate Hill, we believe it is vital to the country's interest to have a coherent energy policy which recognises the gas supply/demand imbalance over the next few years and attempts to find ways to redress this," he said.

"We will continue to work with industry and the Australian government to ensure that there is a policy framework in place that supports growth in Australian manufacturing for the long-term."

Brasher also revealed no short term or long term incentives were paid to management in 2013 due to two workplace fatalities and a failure to meet profit targets.

He revealed a truck driver at a remote location in Canada and a contractor on an Australian site were both fatally injured, despite a downward trend in safety incidents within the company.

Managing director and CEO James Fazzino added that for their Australian fertilizer business, earnings were down by 37% year on year, largely due to the combination of falling global fertilizer prices and the strong Australia dollar.

"There is no doubt that we are in a challenging period in respect of bottom-of-the-cycle global prices for fertilisers, a stubbornly high Australian dollar and the rising cost of doing business in Australia," Mr Fazzino said.

Mr Brasher said IPL's focus is on China's growth and the shale gas revolution in the US, with the completion this year and operation of the Moranbah ammonium nitrate (AN) plant and the commencement of construction of the Louisiana ammonia plant.

While not covered in the chairman's or CEO's address, it is understood IPL will soon stop storing explosive chemicals at its Port Adelaide facility, following moves from the local council and state government to relocate the plant.

It is understood the South Australian government will buy the current IPL site, with a new site chosen within six to 12 months. The move comes as the government address safety risks at Port Adelaide.

IPL also announced the appointment of Steve Dawson as president of manufacturing operations, effective 1 January 2014, and Simon Atkinson as president of Dyno Nobel Asia Pacific and Global Technology.

The company operates six ammonia plants and also produces urea, ammonia, sulphuric acid and ammonium sulphate (AS) at facilities in Queensland and New South Wales.

The company also owns and operates manufacturing plants in the US, Canada, Turkey, Mexico, Chile and Indonesia, and has joint venture operations in South Africa, Malaysia and China.

(A$1 = $0.89, $1 = €0.73)

Additional reporting by Richard Ewing in London

By Kate Wilcock