Incitec Pivot shares fall as split plans receive positive reception

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Seeking to lift its appeal, Incitec Pivot said it would relaunch an abandoned plan in 2020 and now intends to split the business into two listed companies in 2023, subject to shareholder approval, as the two businesses diverge more and more.

It had explored selling its fertilizer arm in 2020, but ended talks as the COVID-19 pandemic shook market confidence.

Incitec Pivot’s managing director, Jeanne Johns, has revealed her intention to split the company. Chris Hopkins

“We believe that building two market-leading, well-capitalized companies with strong technology, clear growth strategies and listening to our customers will create significant value for our shareholders,” said Ms. Johns.

Good time

The announcement of the split plan came as Incitec Pivot reported record half-year earnings. The company said net income jumped to $384.1 million in the six months ending March 31 from $36 million in the year-ago period, supported by improving volumes of the Dyno Nobel Americas business and the recovery of the fertilizer business.

Incitec Pivot said it would pay an interim dividend of 10¢ per share to shareholders, up from the 1¢ payment a year earlier.

Ms Johns welcomed the result and said Incitec Pivot’s balance sheet would equip the two separate companies for growth.

In January, Incitec Pivot completed its 91 million euro ($139.9 million) purchase of French rival Titanobel, which it said would allow it to increase sales of its electronics products to Titanobel 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 inhibited the development of each segment. By separating, there would no longer be a need for the “one size fits all” policy that currently governs the business and both companies would have strong capital funding for growth.

Australia first

While presenting promising prospects, Incitec Pivot is also facing high gas prices. At the end of 2021, Incitec Pivot announced that it would close its aging fertilizer plant in Queensland after being unable to source cheap gas.

Ms Johns said the remaining factories were in long-term gas contact, as she hinted at her desire to see Labor lower domestic prices.

“I’ve seen an awful lot of statements about the importance of security of supply for domestic manufacturers and ensuring that our domestic gas market supports them by encouraging the ability to secure long-term contacts at prices that make competitive businesses. We would certainly be happy with that,” says Ms. Johns.

Domestic gas prices have risen sharply recently amid the global energy crisis, while a series of blackouts at Australia’s coal-fired generators has increased the country’s reliance on gas for baseload supply, and some manufacturers have said they will have to shut down if prices don’t drop.

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