Explosives and fertiliser producer and manufacturer Incitec Pivot (ASX:IPL) released its FY15 results today which showed a 12% increase in net profit to $398.6m.
Excluding one-off material items net profit after tax rose $42m or 12% against 2014. Operating cashflow increased 41% to $756.2m while revenue totalled $3.6bn (up 8.7% compared to pcp).
Incitec Pivot manufactures and distributes a range of fertilisers, explosives but provides also services to the agriculture and mining industries. As a low-cost supplier Incitec Pivot is the market leader in supplying plant nutrient products to Australia’s agricultural sector and is also the leading supplier of industrial explosives in North America.
Total dividends increased by 9% to 11.8 cents per share in line with the 10% lift in earnings per share. The payout ratio is 50% of NPAT. IPL’s price to earnings multiple is currently at ~16, slightly ahead of the market average.
IPL Managing Director and Chief Executive Officer James Fazzino said: “To have produced double-digit profit growth in this environment is a result of our successful strategy and our commitment to risk management and is a tribute to our people having delivered on the strategy through our Business Excellence program.”
Furthermore he emphasised on the challenging trading conditions due to “cyclical downturns and external influences” which have challenged the resources and agricultural industries.
For FY16 Mr Fazzino has not provided a clear target goal, but he believes that the challenging environment will persist. However he states that the company is well prepared to balance these challenges through execution of its program which will result in improved productivity and manufacturing reliability. The Louisiana ammonia plant is on track to commence production in late 2016 while a lower AUD will continue to boost overseas revenue.
Investors were not impressed by IPL’s profit announcement which was broadly in line with expectations. IPL eased 1.3% in early trading to trade around 5 cents lower. IPL has gained ~19% year-to-date and is up ~30% in the past 12 months.
Letter of Intend with Real Energy Corporation (ASX:RLE)
In May this year Incitec Pivot has signed a letter of intent with Wise-owl pick Real Energy (ASX:RLE) which has cleared the path for negotiations with respect to finalising a gas sale agreement for the sale of gas from RLE’s Cooper Basin gas project. The agreement is a great step for RLE to commercialise its assets and fill the east coast gas void which is a result of significant gas demand in the area.
Author: Simon Herrmann
Nov 10, 2015
Simon is a financial analyst at independent research firm Wise-owl who wants to change the world by disrupting the cliché approach to investment decision making with convergent thinking. Wise-owl’s goal is plain and simple: Find the best opportunities for our members by following a proven methodology and to create long-term value through high-quality advice, innovation, technology and education. We combine industry experience and the agile mentality of a start-up. Wise-owl is the future of stock market investing.