Incitec Pivot Limited (ASX: IPL) is mainly involved in manufacturing and distribution of industrial explosives, industrial chemicals and fertilisers. Today (i.e., 2 April 2019), the company has provided an update on its H1 FY19 results in which it has informed about various factors which are impacting the first half earnings before interest and tax (EBIT) and the full year outlook.
In its update, the company has informed that due to dry weather across pasture, summer and winter cropping regions in Eastern Australia, the distribution sales in H1 FY19 are currently down by around 200,000 tonnes as compared to the prior corresponding period (pcp). And the company does not expect any substantial recovery in the second half of FY19. As a result of this, the company is expected its H1 FY19 EBIT to be around A$20 million lesser than the EBIT in the pcp.
While providing the update on the Queensland rail outage, the company informed that it has been working to reduce the impact of the outage by creating an alternative logistics.
It is expected that the financial impact of the outage on H1 FY19 EBIT will be around A$60 million with the total impact for the 2019 financial year now anticipated to be around the lower end (A$100M) of the range previously announced.
Following the review of its Single Super Phosphates (SSP) manufacturing operations in Victoria, the company has advised that it will close down its Portland SSP manufacturing facility in May 2019. Further, the operations of the Portland facility will be consolidated to the Geelong SSP manufacturing facility. As a result of the closure and subsequent consolidation of operations to Geelong, the company expects to incur a total cost of around A$13 million which will be included in the FY19 results.
It is expected that the combined operations will deliver Synergies which will bring in additional A$3 million EBIT per annum and a sustenance capital saving of around A$1 million per annum, both from FY 2020.
While providing the update on its Louisiana Ammonia Plant, the company informed that it has successfully mitigated the issues which were previously experienced in the plant’s CO2 removal system.
Recently in late March, the plant was taken down due to issues relating to compressor electronic controls. The company expects the full rate production will resume in the second week of April 2019. The company expects to generate EBIT of A$14 million from its Louisiana Ammonia plant in the first half of FY19 as compared to A$62 million in the pcp.
The company’s H1 FY19 results are scheduled to release on 20 May 2019.
In the past six months, the share price of the company decreased by 20.60% as on 1 April 2019. At the time of writing, i.e., on 2nd April 2019 AEST 1:08 PM, the stock of the company was trading at a price of A$3.080, down 2.057% during the day’s trade with the market capitalisation of ~A$5.07 Bn.
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