Incitec Pivot to keep fertilisers business
Incitec Pivot has canned a sale or demerger of its fertilisers unit amid virus uncertainty and will retain the business.
Incitec Pivot has canned the potential $500m sale or demerger of its Australian fertilisers unit due to COVID-19 uncertainty and will now retain the business within the group.
The manufacturer in September started a strategic review of its fertilisers unit which makes, imports and distributes fertilisers including urea and ammonia in Australia.
Incitec was weighing a possible sale, demerger or further investment in the unit, with UBS advising on the strategic review.
Chief executive Jeanne Johns said it had stopped talks with potential buyers under the sale option and also decided a potential demerger was not the right strategy given “extraordinary” market uncertainty and travel restrictions.
One of the world’s largest producers, Canada’s Nutrien, bowed out of the contest in February, The Australian’s Dataroom column reported.
“The impact of the COVID-19 pandemic on market conditions has created extraordinary uncertainty,” Ms Johns said.
“The Incitec board has concluded that it is in our shareholders’ best interests that we continue to capture the synergies in global nitrogen manufacturing and run the industry leading businesses of Incitec Pivot Fertilisers and Dyno Nobel to deliver quality products and services for our customers in the agricultural and resources sectors.”
A potential break-up of the company has been weighed up for some time with the fertiliser division enduring tough conditions across its Gibson Island and Phosphate Hill operations in Queensland and its Geelong facility.
Perpetual, Incitec’s third largest shareholder with a 6.85 per cent stake, had backed the company’s move, citing the unit’s underperformance.
The fertiliser business was a distraction for Incitec’s management compared with its stronger explosives earnings, Bank of America Merrill Lynch said last year.
Incitec said the pandemic had not had any significant impact on the company’s business operations to date and recent rainfall across eastern Australia had created significant demand by farmers for fertiliser.
In September Incitec said any decision to keep its fertiliser division would require further investment to grow the business, and smooth out traditionally choppy revenue flows.
Incitiec did not give any indication of its future plans for the division on Tuesday, but is expected to update the market when the company delivers its half-year financial results on May 12.
Incitec shares closed up 1 per cent, or 2c, to $2.11 each on Tuesday, against a 2.5 per cent fall in the benchmark S&P/ASX 200 Index.
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