Incitec Pivot is a manufacturer of fertiliser and explosives products that operates across four divisions: Incitec Pivot Fertilisers, Southern Cross International, Dyno Nobel Americas and Dyno Nobel Asia Pacific. Its primary geographic exposures are Australia and North America.
The company has recently experienced unplanned outages at its Louisiana and Phosphate Hill plants, which combined have had a negative impact on its FY19 earnings before interest and tax (EBIT) guidance of $45m. We have revised our model accordingly and updated key commodity prices, which has reduced our FY19 EBIT forecast from $665m to $607m.
- Louisiana plant outage – The Louisiana ammonia plant outage is expected to result in about $25m lower EBIT and reduced production of 80,000 tonnest in FY19. We have reduced our FY19 Dyno Nobel Americas (DNA) EBIT forecast to $282m from $315m, and our FY19 Louisiana production volumes to 720,000t from 800,000t (320,000t in 1H19 and 400,000t in 2H19). The outage is due to issues in the plant’s carbon dioxide removal system which forms part of the ammonia production process. The plant has been shut down for about 2.5 weeks since mid-January, with repairs expected to take a further 2.5 weeks, to be completed by mid-February.
- Phosphate Hill plant outage – The Phosphate Hill ammonium phosphate fertiliser plant outage is expected to result in about $20m lower EBIT and reduced production of 50,000t in FY19. We have lowered our Southern Cross International (SCI) FY19 EBIT to $97m from $125m, and our FY19 Phosphate Hill production volumes to 950,000t from 1Mt (450,000t in 1H19 and 500,000t in 2H19). The outage was due to leakages at the plant’s phosphoric acid facility in early January. The repair work has been completed and the plant has resumed normal operation.
We maintain our Buy recommendation on Incitec Pivot and have trimmed our target price to $4.10 from $4.20 due to changes to our earnings forecasts.