• Statutory Result After Tax: Loss of EUR $311 million, primarily due to non-cash impairments in the fertilizer business.
• EBIT: $580 million, reflecting an 18% improvement on fiscal year '23.
• EBITDA: $925 million on a continuing operations basis.
• Dividend: Final dividend of 6.3 per share, unfranked, with a total ordinary dividend of 10.6 per share for fiscal year '24.
• Capital Expenditure: $379 million, 23% lower than the previous year.
• Net Debt to EBITDA: 0.8 times.
• Dyno Nobel Asia Pacific EBIT: $257 million, up $69 million from the prior year, with an EBIT margin of just over 17%.
• Dyno Nobel Americas EBIT: $132 million, a 13% increase from the prior year.
• Fertilizer Distribution EBIT: Record performance driven by volume and margin improvements.
• Transformation Program Uplift: $64 million EBIT improvement in fiscal year '24.
• Capital Return Program: $649 million returned, with $751 million remaining.
• ROIC Including Goodwill: Increased from 6.1% to 6.3%.

• Warning! GuruFocus has detected 8 Warning Sign with ICPVF.

Release Date: November 10, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Incitec Pivot Ltd (ICPVF) reported record earnings in its Dyno Nobel Asia Pacific explosives business and fertilizer distribution business, highlighting strong operational performance.
• The company's transformation project has exceeded expectations, delivering a $64 million EBIT improvement in fiscal year 2024.
• Incitec Pivot Ltd (ICPVF) announced a final dividend of 6.3 cents per share, maintaining a 50% payout ratio, which reflects strong capital management.
• The company has made significant progress on its $1.4 billion capital return program, having returned $649 million to shareholders so far.
• The company's advanced technology and strong customer partnerships are driving growth, particularly in the metals markets, and positioning it well for future demand.

Negative Points

• Incitec Pivot Ltd (ICPVF) reported a statutory net loss after tax of $311 million, primarily due to non-cash impairments in its fertilizer business.
• Safety performance has been below expectations, with a TRIF of 1.08, which includes a fatal road incident, exceeding the fiscal year 2024 target of 0.8.
• The company's fertilizer business has been impacted by uncertainty over gas prices in Australia, leading to impairments and operational challenges.
• The strategic review of the Phosphate Hill asset is complex and ongoing, with no resolution expected before September 2025.
• The company faces a heightened program of plant turnarounds in fiscal year 2025, which is expected to negatively impact earnings.

Q & A Highlights

Q: What was the equivalent exit run rate for the Transformation program as of September 2024? A: Paul Victor, CFO, stated that they have not provided that specific run rate. However, the transformation program has resulted in a $64 million benefit, indicating a significant step change. The focus remains on achieving a 40 to 55% run rate by the end of FY25.

Q: What is the expected EBIT growth for the North American explosives business and DN AP? A: Paul Victor, CFO, explained that the North American explosives business is expected to grow earnings by mid-single digits. For DN AP, growth will depend on recontracting benefits, with further increases anticipated despite some operational challenges.

Q: Why is the strategic review of Phosphate Hill taking so long, and what are the implications if manufacturing ceases? A: Mauro De Moraes, CEO, noted the complexity of the asset, including gas price uncertainties and stakeholder engagements. The review aims to explore all options, including the potential for phosphate rock export, with a decision expected by September 2025.

Q: Can you provide details on the surplus land opportunity at Gibson Island and Geelong? A: Mauro De Moraes, CEO, mentioned that while they have not disclosed land valuations, they expect to release significant value from Gibson Island. Geelong is currently used as a distribution center, and future real estate opportunities will be considered later.

Q: What is the current landed pricing for explosive-grade AN into Australia, and how does it relate to the upcoming recontracting cycle? A: Mauro De Moraes, CEO, estimated the current landed price at around $1,100 per ton, which will influence the recontracting cycle starting in 2025.

Q: What are the expected below-the-line transformation costs over the next few years? A: Paul Victor, CFO, indicated that transformation costs for the current year are around $30 million, with further costs expected next year, including redundancies and consulting fees. The overall cost is expected to be modest relative to the earnings uplift.

Q: How should we think about the Moranbah gas price step-up in FY26? A: Paul Victor, CFO, stated that they do not expect a significant step-up in gas prices for Moranbah in FY26, as they manage costs prudently and pass on higher costs to customers when necessary.

Q: How will the transformation program benefits be split between DN AP and DNA? A: Paul Victor, CFO, explained that while DN AP saw significant benefits in FY24, DNA is expected to contribute significantly to the $300 million transformation target through improved pricing, customer growth, and operational efficiencies.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.