Log in
E-mail
Password
Show password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON
  1. Homepage
  2. Equities
  3. Australia
  4. Australian Stock Exchange
  5. Incitec Pivot Limited
  6. News
  7. Summary
    IPL   AU000000IPL1

INCITEC PIVOT LIMITED

(IPL)
  Report
SummaryChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsOther languagesPress ReleasesOfficial PublicationsSector news

Incitec Pivot : Lofty Prices Stand Incitec Pivot In Good Stead

09/14/2021 | 10:27pm EDT

Elevated prices for fertiliser and ammonia and an expected recovery in explosives put Incitec Pivot in a strong position despite the impact of Hurricane Ida

-Hurricane Ida to impact Incitec Pivot's earnings for the final month of FY21
-Elevated gas prices supporting ammonia markets globally
-Waggaman needs to run smoothly for some time to instigate a re-rating

 

As the financial year closes for Incitec Pivot ((IPL)), another difficulty to surmount has come in the form of Hurricane Ida, which is a reminder of the many issues that have plagued operations at Waggaman, the company's ammonia plant in Louisiana.

The plant was shut down on August 28 in anticipation of the hurricane to protect against damage, and the re-start has been awaiting the restoration of high-voltage industrial power.

The total outage is anticipated to be four weeks from the date the plant was shut down, which correlates with the final month of the company's financial year and results in another material downgrade to earnings estimates.

The timing is unfortunate, given the advantage lost from an historically high ammonia price, and Morgans downgrades forecasts for FY21 while keeping FY22-23 unchanged. Macquarie notes the balance sheet is in good shape since a capital raising in 2020 and gearing should have fallen in the second half, consistent with normal seasonal trends.

The broker also suspects the market will look through the interruption, as Waggaman has performed much better recently. The plant has been running at nameplate capacity since the end of May and has not sustained any damage to its structure from the hurricane. Macquarie estimates the last four months (June-September) of FY21 will have averaged 93% utilisation.

There will be two more turnarounds in the company's plants, at Cheyenne and Phosphate Hill during FY22, after which there will be a breather and the next cycle will not occur until FY25.

Brokers also concludes there is material upside from this point if fertiliser prices hold up and no further manufacturing issues eventuate. The loss in EBIT terms is -US$28m while the impact on net profit is -US$21m. Moreover, the plant now needs to successfully re-start hence, as Macquarie points out, there is some residual risk.

Morgans downgrades its estimates to a lesser extent than the headline indicates, to account for higher fertiliser prices. Moreover, there is material upside if prices hold around current levels. For FY22 the broker assumes an average diammonium phosphate (DAP) and ammonia price of US$470/t and US$420/t versus spot at US$632/t and US$615/t, respectively. As UBS notes, the latter (Tampa spot ammonia price) is up 140% over the year to date.

Fertiliser

The broker observes most market commentators expect fertiliser prices to remain high until at least the first quarter of 2022, amid strong demand, supply disruptions and rising raw material costs. Morgans also expects a recovery in Incitec Pivot's Asia-Pacific explosives business and a larger cotton season during FY22 will provide benefits in terms of fertiliser sales.

Gas costs are also surging in the UK and Europe, underpinning the ammonia price. As Macquarie points out, US gas prices may be surging but Europe has risen more because of a very tight LNG market, and this provides a favourable margin spread for US nitrogen producers.

Morgan Stanley adds an observation that urea and DAP prices in the US have increased in the wake of Hurricane Ida while Chinese DAP prices are unchanged. Yet, as UBS reflects, DAP prices in Asia are still up 70% in the year to date.

Re-Rating?

Morgans assesses the fundamentals for Incitec Pivot are attractive compared with the broader market and competitor Orica ((ORI)), yet recognises the Waggaman plant needs to run properly for an extended period of time in order for the market to become comfortable and re-rate the stock.

Macquarie agrees Incitec Pivot is trading at a large discount to Orica on FY21 and FY22 multiples, with the main risks being further problems with manufacturing, or a slump in fertiliser prices.

UBS considers the stock highly leveraged to ongoing strength in global agriculture and believes its forecasts of 30% EBIT growth in FY22 will be underpinned by favourable fertiliser pricing along with a better manufacturing performance and resilient explosives markets.

Tight supply amid a likely reduction in DAP exports from China is also a feature and elevated global gas prices will support ammonia markets in the absence of new merchant ammonia capacity.

FNArena's database has seven Buy ratings for Incitec Pivot with a consensus target of $3.06 that suggests 11.5% upside to the last share price.

See also, Incitec Pivot Re-Rating Dependent On Waggaman on May 19, 2021.

FNArena is proud about its track record and past achievements: Ten Years On

All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.

© 2021 Acquisdata Pty Ltd., source FN Arena

All news about INCITEC PIVOT LIMITED
10/18FORTESCUE METALS : Australia must commit to carbon cuts to keep green energy advantage -Fo..
RE
10/14INCITEC PIVOT : Activists press Australian explosive maker Incitec to set emissions target..
RE
10/10FORTESCUE METALS : Australia's Fortescue to make green hydrogen equipment in Queensland
RE
09/14INCITEC PIVOT : Lofty Prices Stand Incitec Pivot In Good Stead
AQ
09/13INCITEC PIVOT : Resumes Operations at Waggaman Ammonia Plant in Louisiana Following Hurric..
MT
09/12GENERAL ANNOUNCEMENT : :Waggaman Update
PU
09/05INCITEC PIVOT : CFO Resigns
MT
09/05Incitec Pivot Limited Announces the Resignation of Nick Stratford as Chief Financial Of..
CI
08/24CENTRAL PETROLEUM : to Expand Pilot Program at Range Gas Project
MT
08/04INCITEC PIVOT : 2021 IPL CDP Water Security Report (2020 IPL FY)
PU
More news
Financials
Sales 2021 4 078 M 3 045 M 3 045 M
Net income 2021 295 M 221 M 221 M
Net Debt 2021 1 087 M 811 M 811 M
P/E ratio 2021 20,6x
Yield 2021 2,32%
Capitalization 5 827 M 4 353 M 4 351 M
EV / Sales 2021 1,70x
EV / Sales 2022 1,58x
Nbr of Employees 5 000
Free-Float 99,9%
Chart INCITEC PIVOT LIMITED
Duration : Period :
Incitec Pivot Limited Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends INCITEC PIVOT LIMITED
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 11
Last Close Price 3,00 AUD
Average target price 3,15 AUD
Spread / Average Target 5,15%
EPS Revisions
Managers and Directors
Jeanne M. Johns Chief Executive Officer, Director & MD
Nick Stratford Chief Financial Officer
Brian G. Kruger Non-Executive Chairman
Robert Rounsley Chief Technology Development Officer
Margot Sharapova Executive Chief Information Officer
Sector and Competitors
1st jan.Capi. (M$)
INCITEC PIVOT LIMITED31.58%4 494
SHIN-ETSU CHEMICAL CO., LTD.6.01%69 894
BASF SE-2.97%67 164
DUPONT DE NEMOURS, INC.1.59%37 786
ROYAL DSM N.V.30.54%36 498
PIDILITE INDUSTRIES LIMITED31.29%15 666