IPL ammonia plant handover marks positive turn in cash flows
In October, Incitec Pivot (ASX:IPL) announced the completion and handover of its Louisiana ammonia plant (known as “Waggaman”), which is a key milestone for the group.
Shares in IPL have underperformed considerably in FY16, driven by a downturn in fertiliser and associated chemical prices. For IPL, the start up of Waggaman marks a turn in cash flows for the company, with capital expenditures having peaked and cash flows from the plant likely to contribute positively in coming periods.
Pricing for UREA, and to a lesser extent DAP and ammonia, appear to have found somewhat of a floor, which if sustained, should prove supportive for IPL shares.
The timing of a rebound in price for its various commodities is unknown, although we take comfort from the track record of IPL’s management team at improving the productivity of its businesses, offsetting some of the price headwinds.
October 2016 reports