Incitec Pivot Ltd (ASX: IPL) has just released its FY20 result. Will the shares boom in response today?
Incitec is a business that manufactures fertiliser, explosive chemicals and industrial chemicals.
FY20 result highlights
The business reported that it generated $123 million of statutory net profit after tax (NPAT) after $65 million of ‘individually material items’.
Excluding those material items, underlying profit went up 23% to $188.2 million.
Looking at the EBIT level (click here to learn what EBIT means), underlying EBIT went up by 23% to $374.5 million.
Dyno Nobel Americans reported EBIT of $230.8 million, down 1% on last year. Volumes in the explosives business were impacted by structural declines in the coal market as well as temporary COVID-19 restrictions at some customer mining operations. However, margins continued to be strong.
The other major segment, Dyno Nobel Asia Pacific, saw EBIT decline by 17% to $149.3 million. While volumes in the Australian business held up well, earnings were impacted by the previously announced re-contracted of Moranbah foundation customers, as well as lower earnings from Indonesia.
Balance sheet and dividend
Net debt reduced by almost $700 million to $1.03 billion, reflecting net proceeds of the $646 capital raising and its cashflow generation. Despite that, the board decided not to pay a dividend due to COVID-19 and its capital raising from earlier in the year. However, the company is still going to keep paying between 30% to 60% of profit as a dividend into the future.
Management comments
Incitec Pivot CEO and managing director Jeanne Johns said: “While 2020 has been a challenging year on many fronts, our businesses have delivered a strong operating performance and we have made good progress on our strategic agenda.
“We acted quickly to implement new control measures to keep our people and customers safe throughout the pandemic, which enabled us to provide uninterrupted supply to customers in the essential resources and agricultural sectors.
“Our businesses are well placed in the current COVID-19 environment. Our premium technology will continue to underpin the growth of our explosives business and there is significant upside in our Fertilisers business when commodity prices recover.”
Summary thoughts
Aside from the material items relating to writedowns and the COVID-19 response plan, this seems like a solid result from the business. However, I can’t say I know much about the business or the sector.
If I were looking for ASX growth shares relating to the mining sector then RPMGlobal Holdings Ltd (ASX: RUL) could be a better idea. However, I prefer tech business Pushpay Holdings Ltd (ASX: PPH) as a growth idea today.