Incitec still nervous about its recovery

According to a story this morning in the Australian Financial Review (AFR), Incitec Pivot CEO James Fazzino said while the outlook for commodity prices is more positive than six months ago, he still expects challenging conditions for the company to persist into 2017.

“The markets were tough given the downturn in the global resources industry and also fertiliser prices which were at or towards cyclical lows,” Fazzino said to the AFR.

He also noted cyclical and structural factors, such as the steep decline in commodity prices and mine closures as a threat to continued profit growth for the explosives and fertiliser manufacturer.

2017 will unlikely to be much better, the company warned, given it expected weak global fertiliser prices to persist and its mining customers to continue to focus on reducing costs, according to the AFR story.

Overall, Incitec Pivot’s Asia Pacific explosives division manufactured more than 344,000 tonnes of ammonium nitrate during 2016, up 11.1 per cent from the previous year, while at the same time, its revenue increased just 1.1 per cent to $AUD920.8 million, with about half of that coming from the coal sector.

“We have seen a lot of capacity come out of the global fertiliser market.  China has closed 9 million tonnes of urea production and to give you a sense they produce 90 million tonnes of urea … so if you believe in those price increases then that is definitely positive for both our explosive business but also our fertiliser business,” Fazzino was quoted as saying.