Explosives and fertiliser maker Incitec Pivot has urged Australian governments to deal with soaring local gas prices as it posted a fall in first half profit.
As a heavy natural gas user, the global company is highly exposed to Australian prices that could double due to the suite of liquefied natural gas projects that will export product overseas.
It recently committed $US850 million to a US ammonia nitrate fertiliser plant in Louisiana, where gas prices are lower.
Incitec Pivot chief executive James Fazzino said he had not yet bedded down gas supplies with petroleum producers for when current contracts run out in the next few years.
“It’s still an issue for us, we’re continuing to talk to some of the producers, we’re continuing to talk to governments at the state and federal level,” he told reporters in a teleconference.
“It’s a complex issue, all I can report is we’re talking but we haven’t done that, it’s challenging.
“The question is does someone want to act?”
Australian manufacturers are already battling a high dollar and say some of Australia’s gas should be reserved for them at a cheaper price.
Mr Fazzino did not explicitly criticise the Australian government but contrasted the situation to the US, where manufacturing is booming due partly to cheap gas.
“Manufacturing is growing and creating hundreds of thousands of jobs, here in Australia it is tough to be a manufacturer,” he said.
Incitec Pivot posted a first half profit on Monday that dropped 23 per cent to $110.3 million, compared to the prior corresponding period, with its fertiliser operations hit by the high Australian dollar.
The result seems to have been expected or already priced in, with its share price 12 cents, or 4.2 per cent up at $2.95 shortly before the market closed.
The fertiliser business, Australia’s largest, suffered a 19 per cent fall in earnings to $49.6 million for the six months to March 31 due to the high Australian dollar and falling prices for the product around the world, Mr Fazzino said.
However earnings would improve in the second half, he said.
Earnings in the explosives business rose seven per cent to $146.8 million, also missing estimates, but with mining volumes and demand for explosives still high despite lower commodity prices.
IG market strategist Evan Lucas said the result was disappointing and had missed expectations.
“That will see questions asked about efficiencies and product diversification,” he said.
“However, the US division looks like the place for resurrection in the fertiliser business as the season picks up with the explosive business having the advantage of constant demand – this should see second half earning improving.”
Incitec Pivot’s $1 billion ammonium nitrate plant at Moranbah, in central Queensland, began production in 2012.
Incitec Pivot declared a partly-franked interim dividend if 3.4 cents per share, up from 3.3 cents per share at the same time last year.
