13/11/2018 - 11:14

Incitec takes $7m WA loss

13/11/2018 - 11:14

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Explosives manufacturer Incitec Pivot has reported a 34.8 per cent fall in profit for the year to September, including a $7 million hit from lost business in Western Australia.

Incitec takes $7m WA loss
Incitec lost a contract with Roy Hill last year. Photo: Roy Hill

Explosives manufacturer Incitec Pivot has reported a 34.8 per cent fall in profit for the year to September, including a $7 million hit from lost business in Western Australia.

Profit for the 12 months to September 30 fell to $207.9 million due to the non-cash goodwill impairment of $139.5 million against its Dyno Nobel Asia Pacific industrial explosives and blasting services business.

The Melbourne-based company said growth in earnings before interest, taxes, depreciation, and amortisation of $22.2 million in its explosives business was partially offset by the loss of contracts in WA.

Last year, the company announced it had lost two contracts to supply ammonium nitrate BHP and Roy Hill worth about $85 million combined.

Orica was awarded the BHP and Roy Hill contracts.

In June, Incitec was awarded a five-year supply contract with Fortescue Metals Group, after incumbent Orica did not receive an extension.

Incitec also said it expected the impact from contract losses in WA to result in a $14 million hit to EBIT in FY19.

Shares in the company fell more than 7.5 per cent following Tuesday's announcement, making them the worst performing of the top 100 companies on the ASX.

Incitec, which paid a partly franked final dividend of 6.2 cents, did not provide profit guidance for FY19 but said dry conditions in NSW and Queensland could hit irrigation water availability in key summer crop markets.

The company said the FY18 impact of the east coast drought, which dampened nitrogen demand for winter crops, was somewhat mitigated by higher global urea prices, higher sales volumes in other regions and higher distribution margins, underpinned by improved supply chain management.

Managing director and chief executive Jeanne Johns said operating performance had improved across the company's portfolio, including the explosives businesses in the US and Australia.

"Our fertilisers business in Australia also had a strong result, considering the large turnaround at Phosphate Hill and the drought conditions experienced in much of New South Wales and southern Queensland," she said.

Profit excluding one-off items rose 9.0 per cent to $347.4 million, and earnings per share rose 10.6 per cent on the same basis.

At 1133 AEDT, Incitec Pivot shares were 32.5 cents, or 7.7 per cent, lower at $3.905.

INCITEC PIVOT'S FY RESULTS

* Net profit down 34.8pct to $207.9m

* Revenue up 11.0pct to $3.856b

* Final dividend 6.2 cents (20 per cent franked) vs 4.9 cents (unfranked) in pcp

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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