What Happened to Incitec Pivot Share Price?

Shares for Incitec Pivot Ltd [ASX:IPL] collapsed this morning after the company announced they expected lower earnings for FY19. Since then, the company has recouped some of the losses.

At time of writing, shares had dropped by 4.2% and are trading at $3.075.

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What happened?

Earlier this year the company issued an earnings guidance of $370 million to $415 million before tax. They now expect earnings to be lower for the period, between $285 and $295 million. That is a 22% to 29% decrease.

Incitec Pivot is an international company that produces and distributes chemicals, explosives and fertilisers. It also has and operates 20 manufacturing plants across the globe.

The reason the company gave for the lower forecast is that their ammonia plant in Waggaman saw lower production than expected. Also, their Fertilisers segment saw a drop in earnings due to the drought affecting New South Wales and Queensland.

In addition, the company had to pay for higher gas costs in Gibson Island. The company’s plant in Gibson Island produces fertilisers and industrial chemicals.

In a statement released today, Incitec Pivot also announced it will be reviewing its Fertilisers Asia Pacific segment. UBS will be performing the review of the business. The aim is to evaluate different venues, including the possibilities of selling or growing it among others.

In regards to the review, IPL Managing Director and CEO Jeanne Johns said:

Now is a logical time to initiate a strategic review, with the business well positioned to benefit from the emergence of ag tech and to leverage its strong platform in the Australian market.

According to the company, Incitec Pivot Fertilisers is the largest fertiliser supplier in Australia. They distribute two million tonnes of fertiliser a year for Australian industries like cotton, sugar and grain.

Should you buy the dip?

Incitec is exposed to both the agricultural and mining sectors. While this is interesting, at the end of the day, there are better opportunities out there to invest in.

You can take a look at our ‘Top 10 Mining Stocks 2019’ report here.

Best,

Selva Freigedo


Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up close many of the economic phenomena that worry Port Phillip Publishing readers, like hyperinflation, bank bail-ins and governments burdened with so much debt it cannot possibly be repaid. Every week, she goes through each article, research note and recommendation produced by our experts around the world to give you information on how to build and protect your wealth. Selva packages the week’s best ideas into one easy to read report: Port Phillip Insider Extra.


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