Why the Incitec (ASX:IPL) share price is in the spotlight today

The Incitec (ASX: IPL) share price will be in focus today after the company announced a supply agreement.

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The Incitec Pivot Ltd (ASX: IPL) share price will be in focus this morning. This comes after the company announced an off-take agreement with Perdaman Chemicals and Fertilisers Pty Ltd (Perdaman).

The Incitec share price was trading at $2.65 at the market close yesterday.

What did Incitec Pivot announce?

This morning, Incitec Pivot advised its wholly-owned subsidiary Incitec Fertilisers has entered into an off-take agreement with Perdaman to receive granular urea fertiliser. The 20-year agreement will see up to 2.3 million tonnes per year of urea from Perdaman's proposed urea plant at Karratha in Western Australia.

The agreement is subject to several requirements before the deal is formally executed. Incitec noted that the most important condition was on Perdaman securing finance to build its new plant.

Should everything go to plan, the offtake agreement will provide Incitec with a long-term domestic supply of urea. This will enable the company to target Australian consumption as well as expand sales into global markets.

Incitec Pivot managing director and CEO Jeanne Johns commented:

The investment by Perdaman in a new, world-scale plant will make it one of the most energy efficient plants in the world utilising low emissions technology.

We are pleased to support such a significant domestic manufacturing project that will use Australian gas to produce urea fertiliser, essential for our Australian and international agricultural markets.

More on Perdaman

Founded in 2006, Perdaman is a West Australian-based multinational group that specialises in a range of markets. This includes fertiliser production to help farmers produce crops, ownership and management of shopping centres, production and distribution of pharmaceuticals, recruitment services and advanced energy solutions.

Its chemicals and fertilisers business focuses on the production of urea, the most commonly traded nitrogenous fertiliser. Urea is non-toxic and contains safe, high nitrogen content that can be easily transported and stored.

Incitec share price review

In 2021, Incitec shares have lifted to record a gain of 16%. The company share price reached a 52-week high of $2.98 in late March.

On valuation grounds, Incitec Pivot commands a market capitalisation of around $5.1 billion, with close to 2 billion shares outstanding.

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