Incitec reports strong fertiliser demand
Nitrogen products company Incitec Pivot says it is seeing strong demand for fertiliser following recent rainfall across most of eastern Australia.
Soil moisture levels in April were at their highest since 2017 and winter had a 65 per cent to 80 per cent chance of being wetter than average for most of Australia, the company said on Monday while reporting a 54 per cent jump in half-year profit to $64.6 million.
Incitec Pivot said it made a $10 million loss on its Asia-Pacific fertiliser business, an improvement on the loss of $32.5 million a year ago.
The company, which also makes industrial chemicals and commercial explosives, in April decided against selling or spinning off its fertiliser business following a seven-month strategic review.
While global fertilisers prices are close to historically low levels, the company is "well placed to benefit from any future improvement in global fertiliser prices", managing director and chief executive Jeanne Johns said.
Overall, Incitec Pivot said its revenue for the six months to March 31 rose 6.0 per cent to $1.85 billion but the company would not pay an interim dividend as it sought to strengthen its balance sheet during the coronavirus crisis.
The company also announced it was raising $600 million through a share sale to institutional and professional investors at $2.00 a share, or an 8.7 per cent discount to the Friday's closing price of $2.19 per share.
It will offer retail shareholders a share purchase plan for up to $75 million in shares at a 2.0 per cent discount.
"Although COVID-19 has not had a significant impact on our business operations to date, global economic uncertainty is likely to impact customer demand and heighten the risk to a recovery in commodity prices," Ms Johns said.
"The equity raising will strengthen our balance sheet and liquidity position, highlighting our commitment to maintaining a strong investment grade credit rating profile as well as increasing resilience in the current environment," she said.
The company had $1.88 billion in net debt as of March 31 for a 2.8 net-debt-to-earnings ratio, and the equity raising will reduce that ratio to 1.9x.
Incitec Pivot shares are in a trading halt.
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