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Incitec lifts profit as Qld plant in doubt

 

Incitec Pivot has more than doubled full-year profit courtesy of rising fertiliser prices and launched a $300 million buyback, but the future of the company's Gibson Island plant in Queensland remains under a cloud as it struggles to secure new gas supply.

Incitec has reported net profit of $318.7 million, a rise of $190.6 million on the previous year, supported by a rebound in commodity and fertiliser prices, particularly nitrogen and ammonia.

However incoming chief executive Jeanne Johns, who takes over from long-term boss James Fazzino on Wednesday, will face the urgent matter of securing a new gas contract for the Gibson Island fertiliser plant or shutting the plant down.

Incitec recorded a $167 million writedown on the 48-year-old Gibson Island facility in 2016, due largely to the spiralling domestic gas costs.

The company's chief operating officer Frank Micallef said on Tuesday it was time to make a decision on the plant and its 450 workers.

"The current gas is contracted to 30 September next year, clearly we want some clarity before that," Mr Micallef said at the company's full-year results presentation.

"But if we are unable to secure gas on economically favourable terms, then manufacturing at Gibson Island is likely to cease."

Mr Micallef said 2017 earnings attributable to Gibson Island were around $45 million.

Closing the plant will cost Incitec about $50 million.

Mr Micallef said the value of Gibson Island land would be between $40 to $55 million net but that the realisation of any surplus of land would come after closure costs.

Meanwhile, on the back of a record earnings year for the company's explosive division, revenue rose 3.6 per cent to $3.5 billion.

Industrial chemicals earnings rose 83 per cent to $96.5 million, following the New Orleans-based Waggaman nitrogen plant commencement and rising commodity and fertiliser prices.

Earnings for the Asia-Pacific explosives division were flat at one per cent but earnings from explosives in the Americas surged 46 per cent on strong quarry, construction and metals activity.

Ms Johns said the Waggaman plant has already produced better-than-expected nitrogen volumes for September and October 2017.

"It is the most successful new nitrogen investment in North America in many years," Ms Johns told shareholders.

The company also announced an on-market share buyback of up to $300 million, in addition to a final unfranked dividend of 4.9 cents per share, up from 4.6 cents a year ago.

At 1456 AEDT, shares in Incitec Pivot were trading 21 cents, or 5.6 per cent, higher at $3.95.

INCITEC DOUBLES DOWN ON FY PROFIT:

* Net profit of $318.7m, from $128m in 2015/16

* Revenue of $3.5b, from $3.4b

* Unfranked final dividend of 4.9 cents, from 4.6 cents.