The Incitec Pivot Limited (ASX: IPL) share price is down more than 2% after announcing it had stopped talks about its fertiliser business.
This company has two segments – an explosives business called Dyno Nobel and a fertiliser and soil health services business that aims to increase productivity for agricultural customers.
Talks end about its fertiliser business
The company announced to the ASX that it had ceased negotiations with PT Pupuk Kalimantan Timur, an Indonesian business with ammonia and urea plants.
Incitec said it had carefully considered how to maximise value for shareholders while balancing the risks of completing the transaction in a reasonable timeframe.
The conclusion of the sale process means the company is now able to start its previously-announced on-market share buyback program of up to $900 million. In the near-term, the company “prioritise the buyback for the benefit of its shareholders.”
The company said it will continue to management its Dyno Nobel and fertiliser businesses separately.
Management commentary
The Incitec Pivot CEO and Managing Director Mauro Neves said:
Throughout the sale negotiations with PKT, we were focused on completing a sale transaction in a timely manner to allow us to commence our on-market buyback of up to $900m. We have determined we are unlikely to achieve this outcome with PKT in an acceptable timeframe, and as a result we made the decision to cease negotiations with them.
We will continue to assess options for the structural separation of the two businesses, however in the near-term our focus will be on progressing the on-market buyback program for the benefit of our shareholders.
Led by a talented global executive leadership team, our Dyno Nobel business is being transformed into a global operation which is expected to substantially improve its financial performance.
Our IPF business remains focused on value accretive market share growth and is in a strong position for the agricultural season ahead.
FY24 comments on Incitec Pivot shares
The company said its FY24 earnings outlook for both of its businesses remains consistent with commentary provided at the FY24 first-half result. In summary, it said a few months ago it’s focused on delivering “continued earnings momentum” in its customer-facing businesses in the second half of FY24. Incitec also said it’s progressing its strategy of transforming the global explosives business.
I’m not sure what the future holds for Incitec Pivot shares, fertilisers and explosives are certainly not my specialty. But, if the leadership think it’s the right call to hang onto the fertiliser business then investors should perhaps consider giving them time to deliver on that potential.
