Incitec Pivot (ASX: IPL) expects commercial discipline and cost management to drive profitability growth

Highlights

• Incitec Pivot is a manufacturer and supplier of industrial explosives, fertilisers and chemicals and provides associated services
• IPL’s revenue fell in FY23 by 4.86% YoY to AUD 6,008 million
• Janchor Partners Limited has the highest stake in IPL with a shareholding of ~8.91%

Incitec Pivot Limited (ASX:IPL) is an ASX-listed company which manufactures and supplies industrial explosives, fertilisers and chemicals and provides associated services. The company mainly caters to the agricultural and resources sectors. The company operates two customer facing businesses, Incitec Pivot fertilisers and Dyno Nobel.

Dyno Nobel is based in the Europe, Americas, Africa, Middle East and Asia Pacific, while Incitec Pivot Fertilisers is focused on the east coast of Australia.

In the financial year 2023 (FY23) the company reported a 4.86% YoY fall in revenue to AUD 6,008.10 million, driven by lower commodity prices, which fell from historic highs in FY22. In FY24, EBITDA declined by 34.58% YoY to AUD 1,215.40 million and NPAT reached AUD 582 million, excluding individually material items.

Earnings of FY23 are the second-highest earnings since 2008, backed by customer and technology growth.

Top 10 shareholders of IPL

The top 10 shareholders of IPL have around 37.26% shareholding in the company, while the top four shareholders have approximately 25.28% stake. Janchor Partners Limited and Allan Gray Australia Pty Ltd have the highest stakes in the company with a shareholding of ~8.91% and 6.11%, respectively.

Recent business update

On 4 March 2024, the company notified that State Street Corporation and its subsidiary companies ceased to be substantial shareholders in IPL on 29 February 2024.

Through an ASX-update dated 15 February 2024, the company informed that its overall financial performance is aligned with the outlook shared during the 2023 AGM (held on 20 December 2023). The outlook was supported by improved performance of the international explosive business and higher DAP (Diammonium Phosphate) prices. On other hand, Phosphate Hill’s production was affected by maintenance activities conducted in 1HFY24 and Cyclone Kirrily.

Outlook

In the first half, the company expects production from Phosphate Hill to be lower because of Cyclone Kirrily.

In FY24, the expected production range is 730kt – 770kt, compared to previous estimates of 780kt – 820kt. For the fertilisers business, the company expects to see the impact of lower production on FY24 EBIT. The estimated impact is AUD 8.5 million for every 10kt of lost production, including associated costs.

For Dyno Nobel business in Australia, the company expects positive market conditions, including a short-term demand outlook for iron and coal ore and tightening AN market.

The company expects to witness growth in profitability because of continued commercial discipline and increased focus on cost management. The company has a believe that its premium technology has a competitive edge in a market, which priorities value over cost.

Share performance of IPL

IPL shares closed at flat AUD 2.71 apiece on 5 March 2024. With this, in the past nine months, IPL’s share price has decreased by 9.52% and has increased by 10.94% in the last three months.

The 52-week high of IPL is AUD 3.05 recorded on 7 March 2023, and the 52-week low is AUD 2.227, recorded on 15 June 2023.

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, and currency, is 05 March 2024. The reference data in this report has been partly sourced from REFINITIV.

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