market update

ASX ANNOUNCEMENT – 3 February 2009
2009 Update
Incitec Pivot Limited (ASX: IPL) today announced that, while the business performance for
quarter 1 2009 (October – December 2008) had been in line with expectations, the outlook had
deteriorated materially in January 2009. This is a result of the significant slowing of the global
economy, with the US economy now in recession and, importantly, Asian economies have
followed rather than being decoupled.
“January 2009 has seen a slower than expected pick up in international demand for fertiliser.
Consequently, while we believe fundamentals remain strong and markets will eventually
improve when demand returns, recent developments indicate that this may not occur until the
second half of calendar year 2009, after the Australian winter crop planting window. This view
is consistent with the news flow from major international industry participants released in
January” said Managing Director & Chief Executive Officer, Julian Segal.
In the Dyno Nobel explosives business, the North American business has slowed, with coal
production cutbacks in the Powder River Basin and accelerating softness in the quarrying and
construction sector. In Australia, 2009 demand is now expected to be on par with 2008 and the
actions taken by mining companies, in response to the global economic situation, have directly
impacted forecast ammonium nitrate (AN) demand growth in the medium term.
The forecast lag in Queensland AN demand growth pushes the demand and supply balance
out 12 months to 2014 rather than 2013. Consequently IPL has reviewed the implications for
the off-take loading of the planned 330kt Moranbah AN facility.
2009 Profitability based on current spot prices
Consistent with the developments in January, IPL’s 2009 earnings are likely to be adversely
impacted. Assuming current market conditions prevail, and taking into account the difficulty in
forecasting expected full year earnings in the current economic environment, 2009 full year net
profit after tax (NPAT) before individually material items is likely to be circa A$450M.
Individually material items, primarily relating to the Velocity efficiency program, are likely to be
an after tax cost of A$50M.
Key assumptions underpinning the forecast are average Di-Ammonium Phosphate (DAP)
pricing of US$410/t and Urea pricing of US$300/t and A$/US$ exchange rate of 70 cents.
Based on the revised forecast, the profit sensitivities are:
• +/-US$10 DAP price = +/- A$12.9M EBIT
• +/-US$10 Urea price = +/- A$6.1M EBIT
• +/-1 cent A$/US$ = +/- A$15.9M EBIT
Pricing and market conditions may vary from these assumptions. They should therefore be
used with care.
Incitec Pivot Limited
ABN 42 004 080 264
70 Southbank Boulevard
Southbank Victoria 3006
GPO Box 1322
Melbourne Victoria 3001
Tel: (61 3) 8695 4400
Fax: (61 3) 8695 4419
www.incitecpivot.com.au
Revised Moranbah completion
Following the revised forecast AN demand growth for Queensland coal, IPL has decided to
slow the construction of the AN facility at Moranbah in Queensland to better align demand and
supply. During this period the project focus will be on detailed design engineering.
“We remain confident about the future of this project and the value it will deliver to IPL.
However, as demand growth is forecast to pause, we consider it prudent to align supply to
match demand” Mr Segal said.
While mechanical completion will now be up to 12 months later than planned, beneficial
operation will commence from quarter 4, calendar year 2011, only 6 months later than
previously expected.
“Allowing for the revised timeline, the project still meets IPL’s strict financial criteria” Mr Segal
said.
“We have commenced discussions with our alliance partners for the project, United Group
Resources Pty Ltd, Bilfinger Berger Services (Australia) Pty Ltd and BGC Contracting Pty Ltd.”
“It is regrettable that there will be temporary job losses in the Moranbah community as a result
of this decision” Mr Segal said.
Kerry Gleeson
Company Secretary
Investor