Incitec Pivot (IPL) Today, the Australian fertiliser and global explosives company held their annual general meeting for 2023, which showered some Christmas gifts on their shareholders. The HNW Equity Growth Portfolio holds a 3% weight in IPL.

 

  • Sale of Waggaman Ammonia Plant: Earlier this month, IPL cashed the cheque from their sale of their Wagaman Ammonia Plant in Louisiana to CF Industries for US$1.675 billion.
  • Christmas Gift 1: A$500 million to shareholders through a tax effective capital return and unfranked dividend worth $0.27 per share. This will hit out investor’s accounts in February
  • Christmas Gift 2: $900 million on market share buy back that should start tomorrow and occur over the next year. This is expected to decrease the share count by -15% and will support the share price significantly as well as decreasing the divisor of future profits.
  • Fertiliser sale:  Ongoing with market rumours suggest that Indonesian State owned Pupuk Kaltim have offered $1.5 billion though this will be tough to get past FIRB.
  • Outlook: IPL remains in a strong position now benefiting from their ammonia offtake agreement with CF industries as well as the $38 million they made from the plant before selling. The fertilisers side of the business is also performing well benefiting from closer managing of costs. As a pure play explosives business we expect a PE uplift.

CEP Strategy:  IPL is Australia’s largest manufacturer of fertilisers, supplying around 50% of the nation’s fertilisers. Additionally, IPL is the world’s second-largest manufacturer of explosives that are used in mining, quarrying and construction. IPL takes advantage of lower US natural gas prices via their offtake agreement with an ammonia plant in Louisiana. IPL offers us exposure to a well-run global chemical company, benefiting from US shale gas, improving demand for Australian agricultural produce and a falling AUD. IPL is one of the last listed agriculture companies on the ASX, and HK-based activist investor Janchor now owns 9% of the company. IPL trades on a PE of 12x with a 7% yield.

IPL was flat today at $2.87 as most investors were out to lunch, on the beach at Toronto or skiing in Kitzbühel/Chamonix. Overall, very good news for shareholders