The Incitec Pivot Ltd (ASX: IPL) share price is trading down on Monday morning after the fertiliser and explosives manufacturer reported a record first-half profit for the six months ending 31 March 2022.
In the first session of the week, Incitec Pivot shares are fetching $3.69. However, shares opened nearly 7.5% higher at $4.02 amid the cracking half-year result. For comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.23% as investors react to the Federal election outcome.
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Incitec Pivot share price on fire on explosive half-year result
- Revenue up 48% compared to prior corresponding period to $2,548 million
- Record half-year net profit after tax (NPAT) of $384 million, up 955%
- Earnings per share (EPS) jumped from 1.9 cents to 19.8 cents
- Interim 100% franked dividend to increase tenfold from 1 cent to 10 cents per share
- Intention to split Incitec Pivot into two separate ASX-listed companies
What happened during the first half?
The most recent half-year was lucrative for both fertiliser and explosive business segments. Unsurprisingly, investors are reacting with an increased hunger for Incitec Pivot shares today.
There were a couple of key factors ultimately assisting Incitec to the standout result that it has posted today. According to the company, improved commodity pricing and beneficial foreign exchange rates aided in the result.
Additionally, earnings before interest and tax (EBIT) in the American explosive segment operating as Dyno Nobel Americas improved by 221% to $252 million. Similarly, Incitec's Fertilisers Asia Pacific division experienced a 237% increase in its EBIT, reaching $257 million.
What did management say?
Commenting on the stellar result, Incitec Pivot's managing director and CEO Jeanne Johns said:
Our record first half result reflects the quality of our two category-leading businesses and our sharp focus on executing in a high demand, highly disrupted market. Our team has done an excellent job navigating operational complexity to deliver for our customers.
Johns added:
Dyno Nobel's Americas and Asia Pacific teams delivered solid volume growth, with margins continuing
to reflect our high-value technology. The acquisition of Titanobel gives us additional expertise and
people capability to serve select high-quality markets and customers in Europe and Africa, with growth
being driven by technology and a focus on future-facing minerals
What's next?
The big future news for the Incitec Pivot share price is the proposed separation of the company. Announced alongside its results this morning, the company intends to create two separate ASX-listed companies — Dyno Nobel and Incitec Pivot Fertilisers.
Notably, the decision follows a strategic review that found declining synergies in ammonia manufacturing as explosives and fertiliser customers hold more unique solution requirements. In addition, management believes the separation will enable shareholders to best capture future value in each area.
When it comes to costs, current estimates outline an expected $80 million to $105 million in one-off costs. Meanwhile, a further $25 million to $35 million per annum in ongoing costs are forecast.
The company will be targeting the official separation of the two businesses in the first half of 2023.
Incitec Pivot share price snapshot
Since March 2020 crash, the Incitec Pivot share price has steadily climbed higher. In March this year, shares in the company reclaimed their pre-pandemic level, surpassing $3.65.
For shareholders, Incitec has been a winner so far this year. On a year-to-date basis, the company's share price is up 13.9%. Whereas, the ASX 200 index is 3.41% in the red — which means Incitec has outperformed by 17.3%.
