Shares in the $7.17 billion company dropped more than 5 per cent in early trade and ended the day down 3.7 per cent to $3.69.
Ms Johns told shareholders that earnings from a subset of the fertiliser business, the distribution arm, will increase to between $40 millin and $45 million at its full-year results on September 30. Half-year earnings were $18.6 million for the distribution division.
But Incitec’s gas bill has increased by $45 million as the Phosphate Hill fertiliser plant in Queensland has been forced to source extra gas from the spot market and under short-term contracts. Its supplier, Power and Water Corporation, will restore flows in February 2023.
Ms Johns – a vocal critic of soaring east coast gas prices – strongly backed the competition watchdog’s call on the three Queensland LNG exporters to divert gas to the domestic market.
In late 2021, Incitec Pivot said it would shut its ageing Queensland fertiliser plant after being unable to source cheap gas.
The proposed demerger is part of the listed fertiliser and explosive giant’s plan to revive its standing with investors.
Incitec Pivot revived its plan shelved in 2020, and now intends to split the business into two listed companies in 2023, subject to shareholder approval, as the two businesses increasingly diverge.
It had explored the sale of its fertiliser arm in 2020 but ended talks as the COVID-19 pandemic roiled market confidence.
Critical equipment
“On the international investors road trip we found very interested investors,” Ms Johns said.
Incitec Pivot generates about half of its profits from the Americas region where it is a big player in selling explosives to the mining, quarrying and construction industries.
The company told investors it had deferred the turnaround of one of its ammonium nitrate plants in the United States due to critical equipment being unavailable. The Cheyenne, Wyoming, plant was set to be operating at nameplate capacity at the end of calendar year 2023, Ms Johns said.
Its American explosives unit, Dyno Nobel, is also facing supply chain and inflationary pressures, but earnings guidance was not given ahead of the results at the end of the month.
Ms Johns also said the Australian Dyno Nobel business had faced supply chain disruption and La Nina wet weather.
In January, Incitec Pivot completed its €91 million ($139.9 million) purchase of French rival Titanobel, which it said would allow it to increase sales of its electronics to Titanobel’s customers, while France would also serve as a launchpad for expansion into markets such as West Africa and Eastern Europe.
She said there was “minimal overlap” and the current structure was inhibiting the development of each segment.
By separating, there would be no need for the “one size fits all” policy currently governing the business, and both companies would have strong capital funding for growth.
