Incitec Pivot fertilizer output hit by floods, drought

Australia-based Incitec Pivot's (IPL) fertilizer production and profits fell in its July 2018 to June 2019 financial year as operations were hit by extreme weather events.

The firm's total Asia-Pacific fertilizer sales volumes fell by 9pc to 2.75mn t, mainly because of a fall in demand resulting from drought conditions in eastern Australia.

Ammonium phosphates production at the company's Phosphates Hill plant fell by 21pc to 675,000t because of a rail outage in Queensland and a phosphoric acid reactor failure. Its Gibson Island plant produced 370,000t of urea equivalent, down by 24pc from a year earlier, because of maintenance.

The operational issues have been addressed, with Phosphate Hill achieving a monthly run rate equivalent to 975,000 t/yr of ammonium phosphates in June-October. It is expected to produce about 975,000t in 2019-20.

Net profit fell to A$152mn ($104mn) in the period, down by 27pc from A$208mn a year earlier, mainly because of what it described as a "one in one-hundred-year flood event in north Queensland" that affected operations.

Heavy flooding in northern Queensland in January severed the rail link between Townsville port and IPL's Phosphate Hill production site for three months. The lost output cost the firm A$60mn in October-March, the first half of its 2019 financial year.

IPL's Asia-Pacific fertilizers business recorded a loss of A$79.7mn on its earnings before interest and tax in the financial year, after making a profit of A$119mn in October-March, because of a severe and prolonged drought on Australia's east coast. This was in stark contrast to a year earlier, when its fertilizer profits were at A$104.6mn. Higher natural gas prices in eastern Australia reduced the company's fertilizer profits by $43mn.

IPL in September announced a review of its Asia-Pacific fertilizer business and slashed its earnings guidance for 2018-19 to A$285-295mn from A$370-415mn previously. A decision to sell, demerge or retain and invest in its business will be made in the 2019-20 financial year, chief executive Jeanne Johns said today.

IPL produces and distributes fertilizers, while also importing fertilizers into Australia's east coast.

By Satish Rajmohan