Incitec investors seek return of ex-CFO after the exit of the chief executive and earnings downgrade

Expectations are further mounting that Incitec Pivot will shelve its plan to demerge its fertiliser unit. Picture: iStock

Incitec Pivot investors are believed to be keen to see the return of former chief financial officer Nick Stratford, say sources, on the back of the shock departure of the company’s boss, Jeanne Johns, and an earnings downgrade.

The fertiliser and explosives company on Tuesday told the market that Ms Johns would step down as managing director and chief executive, leaving on June 30.

A short time later it said gas shortages for its Phosphate Hill fertiliser plant would cost the company $15m to $20m more than expected, taking its earnings before interest and tax to between $75m and $90m for this 2023 financial year in a move that has left investors fuming.

The financial impact would be ongoing until 2028 as it sourced gas from elsewhere to accommodate the shortfall.

In the meantime, the company will count Paul Victor, Incitec Pivot’s chief financial officer, as its interim boss and chief of staff Liza Somers will be interim CFO.

Ms Johns did not make a comment in the market announcement, but chairman Brian Kruger thanked her for her efforts over the past five-and-a-half years running the group.

He added that she left the company in a strong financial position, and had led some significant transactions that would create long-term value, including the sale of its Waggaman ammonia manufacturing facility in Louisiana, US.

There was no mention of the group’s demerger plans for its fertiliser unit, which has been on the cards through UBS.

The sudden departure comes after DataRoom reported last week of suggestions in the market that discussions were being held around the company’s boardroom, which could see the deal called off.

While chairman Brian Kruger and chief executive Jeanne Johns supported the transaction, sources said there was resistance among directors to proceed, leaving many betting it was unlikely to happen.

Now, the expectation around the market is that the demerger will not proceed.

Some question whether Mr Kruger, who appointed Ms Johns and chaired the group since 2019, also stages an exit in the near future.

Incitec Pivot shareholders have been disappointed by the company’s earnings and share price performance, with rival Orica outpacing it.

One shareholder told DataRoom that Orica had repriced its explosives quite materially, but Incitec Pivot’s unit Dyno Nobel had struggled to reprice.

Nick Stratford left Incitec Pivot at the start of last year to become the CFO of Team Global Express, formerly part of Toll Holdings and now owned by Allegro Funds.

Before working as the CFO, he ran its Dyno Nobel unit from Salt Lake City, Utah, for seven years.

Incitec recently paused its share buyback due to “something material”, and the understanding is that opposition to the demerger within the board was at least partly behind the move.

Some believe that the company may have its investment banking adviser UBS in search of an alternative outcome for the company, which could include a sale of its fertiliser unit to a competitor such as CF Industries or Nutrien or a sale of the business as a whole to a buyer such as a private equity firm.

The unit had been on the market before the global pandemic, but suitors were unprepared to meet its price expectations.

Any sale would likely be at a discounted price in the current market, with declining fertiliser prices and high energy costs.

The $5.7bn fertiliser and explosives manufacturer had earlier said the demerger plan had been delayed and would likely happen sometime after it sold its US ammonia plant, Waggaman.

Incitec agreed to sell Waggaman for $US1.675bn in March to CF Industries, but one shareholder spoken to by DataRoom said that they were against the sale of the facility, adding that they viewed it as strategic to the business and questioned whether the buyer paid the right price.

Joining the board this year has been activist investor John Ho, the founder of Janchor Partners, who was believed to be against the demerger plan.

His business interests have 10.3 per cent of Incitec, including 8.9 per cent voting rights.

Incitec Pivot is a manufacturer and distributor of fertilisers, explosives and chemicals, with 20 manufacturing plants located in Australia, the US, Canada, Mexico, Indonesia and Turkey, and joint venture operations in South Africa, China and Australia.