Incitec Pivot seeks $675m to strengthen balance sheet, profit up
ASX-listed fertiliser and explosives manufacturer Incitec Pivot has tapped investors for $675 million to strengthen its balance sheet and pursue opportunities for growth.
The $3.5 billion company went into a trading halt on Monday morning as it became the latest in a growing list of Australian public companies to raise funds because of the coronavirus pandemic.
Incitec Pivot's explosive products are widely used in the mining industry.Credit:AFR
Incitec Pivot will raise $600 million via a fully underwritten institutional placement. It will also raise up to a further $75 million via a non-underwritten share purchase plan.
The company, a major supplier of fertiliser to farmers and explosives equipment to the mining industry , also brought forward its first half results release to coincide with the capital raise announcement.
The company reported a statutory net profit of $65 million, up 22 per cent on the first half of last year. Earnings before interest and tax (EBIT) rose 34 per cent to $159 million.
On the explosives side of the business Incitec's results were boosted by significantly stronger production levels in its US operations, and greater sales to the US construction and quarry sector.
Incitec Pivot chief executive Jeanne Johns says the company is "well placed" to benefit from any future improvement in global fertiliser prices.Credit:Dominic Lorrimer
Sales of advanced explosives equipment to the mining industry also rose, while the company's local fertiliser business recorded an EBIT loss of $9.9 million, which was far ahead of the $32.5 million loss in the first half of last year. The fertiliser business ended the half with the strong tailwinds generated by significant rainfall in cropping districts, which generated intense demand among farmers for fertilisers.
"The business demonstrated strong resilience in the first half as our overall mining volumes continue to be supported by our premium technology offering. We were pleased with our manufacturing performance as we work towards our improved reliability target by 2022," said chief executive Jeanne Johns.
"The fertilisers business was weighed down by record low commodity prices, as well as drought conditions in the first four months. Improved weather conditions have driven record demand over the last three months and we are well placed to benefit from any future improvement in global fertiliser prices," she said.
New shares issued under Incitec Pivot's $600 million institutional placement will cost $2 per share, which is an 8.7 per cent discount to Incitec Pivot's last closing price on Friday May 8 of $2.19. The placement will result in about 300 million new shares being issued.