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SUBDUED mining and agriculture sectors have hit chemical manufacturer Incitec Pivot's full year profit by $271 million.
Net profit after tax was $128 million, down 68 per cent on the previous year, the company (ASX: IPL) reported today. EBIT was $428 million, down $148 million.
In a year where the company faced cyclical issues, IPL managing director and CEO, James Fazzino, says the focus was on things that could be controlled, such as safety, efficiency, productivity and financial discipline.
"Cyclical and structural factors, including declines in international commodity prices, impacted EBIT by $231 million. This was partly offset by a $71 million positive contribution from productivity improvements across the business," says Fazzino.
Incitec Pivot has implemented a business excellence (BEx) program, which was responsible for the productivity improvement, and it will provide a further $64 million in savings in 2017. Since its inception, BEx has resulted in $160 million worth of savings.
The focus on efficiency will set the company up for the turn in the resources cycle, when it comes.
"The challenges in the global resources industry and cyclical lows in international fertiliser prices are storms that IPL has weathered in the past and is positioned to do so again," says Fazzino.
"I have confidence in our strategic direction based upon our exposure to the world's two largest economies, China and the US, and balanced end-market product exposure of explosives, industrial chemicals and fertilisers.
"Notwithstanding the structural change in the US coal industry, the resources industry is seeing some recovery in coal and iron ore markets. Also, recent rainfall in Australia will provide farmers with the well-deserved outlook for some good seasons in the future.
"Following a five-year investment phase involving $A1bn developments in both Australia and the US, our primary focus now is on driving increased returns to shareholders."
The company is trading down 0.84 per cent this afternoon, at $2.965 per share.
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