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Incitec Pivot profit slumps, while Dulux benefits from local housing

Tuesday, 8 Nov 2016 11:04:49 | Stephen Letts

Incitec's fertiliser earnings were down 63 per cent.

One-time farmer cooperative Incitec Pivot has reported a 68 per cent slump in profit, hit by tough global conditions in its two key enterprises, fertiliser and explosives manufacture.

Incitec Pivot's full-year profit of $128 million was down on the $271 million of 2015.

Underlying earnings - with one off items stripped out - were down 26 per cent to $428 million on an 8 per cent decline in sales revenue.

Fertiliser earnings were down 63 per cent due to weak demand and an oversupply of ammonium nitrate, with the company warning the reduction in global prices may continue into 2017.

The global oversupply in ammonium nitrate and mine closures, particularly in US coal, are expected to impact the outlook for the explosives' business well into next year as well.

Incitec Pivot chief executive James Fazzino said the company had deep experience in managing "through the cycle" to achieve acceptable returns in challenging markets.

"The challenges in the global resources industry and cyclical lows in international fertiliser prices are storms that Incitec Pivot has weathered in the past and is positioned to do so again," Mr Fazzino said.

Mr Fazzino said the company was poised to reap the benefits of a strong position in the metallurgical coal fields of Queensland's Bowen Basin and well as the completion of its new US manufacturing plant in Louisiana.

Mr Fazzino said the completion of the Louisiana plant had transformed Incitec Pivot from an Eastern Australian fertiliser co-op in 2003 to a global diversified industrial chemicals company in 2017.

"I have confidence in our strategic direction based upon our exposure to the world's two largest economies, China and the US, and balanced end-market product exposure of explosives, industrial chemicals and fertilisers.

"Notwithstanding the structural change in the US coal industry, the resources industry is seeing some recovery in coal and iron ore markets.

"Also, recent rainfall in Australia will provide farmers with the well-deserved outlook for some good seasons in the future.

"Following a five-year investment phase involving $1 billion developments in both Australia and the US, our primary focus now is on driving increased returns to shareholders."

In the short term though, investors saw their full year dividend cut by 3 per cent to 8.7 cents per share, while shares are down around 25 per cent on the year to date.

Despite the result being largely in line with expectations, shares slipped another 0.8 per cent in early trade to $2.96 at midday (AEDT).

Dulux lifts profit on solid housing market

Paint and home products maker Dulux reported a solid 5 per cent increase in full-year profit to $125 million.

Sales revenue increased marginally by 1.7 per cent, weighed down by weaker retail sentiment and ongoing declines in spending on big resources projects.

The company's heritage brands - Dulux paints, Selleys and Yates garden products - delivered record profits, while there was improvement from more recent acquisitions such as B&D doors.

Dulux chief executive Patrick Houlihan said forward-looking market indicators in key markets remain largely positive.

"Our core existing home renovation markets, which account for around 65 per cent of group revenue, are expected to continue providing resilient, profitable growth.

Mr Houlihan said the pipeline of new housing projects should also remain relatively strong and forecast net year's full-year profit should exceed $130 million.

Dulux raised its full-year dividend by 7 per cent to 12.5 cents a share.

Investors did not embrace the result with shares slipping 1 per cent to $6.25 at midday (AEST).

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