* Fertiliser earnings fall more than expected
* Remains comfortable with fertiliser business
* Weak coal mine demand to hit H2 U.S. explosives sales
* Considers building ammonia plant in United States
* Incitec shares inch up
MELBOURNE, May 14 Australia's Incitec Pivot
reported a 20 percent fall in first-half underlying
profit on Monday, hit by a sharp drop in fertiliser earnings,
but its explosives earnings surprised, vindicating its expansion
in that business.
As expected, Australia's top fertiliser maker and world no.2
explosives maker did not reaffirm its earlier outlook for modest
profit growth this year after it was hit by volatile fertiliser
pricing and a problem at one of its Australian plants.
Incitec, whose earnings have typically been split 50-50
between fertiliser and explosives, is expanding in explosives to
tap into Australia's mining boom.
It expects strong growth next year after its $935 million
Moranbah ammonium nitrate plant in Australia opens in July.
"We're very confident that we've got the right strategy in
place. It's all around investing in explosives and that'll
generate stable, predictable earnings," Chief Executive James
Fazzino told reporters.
However, Incitec warned explosives sales in North America in
the second half of this year would suffer due to falling demand
from U.S. coal mines. Coal production has dropped as power
generators switch from burning coal to cheaper natural gas.
Its profit before one-offs fell to A$143.5 million for the
six months to March from A$178.6 million a year earlier,
compared with an average forecast of A$147 million from nine
Fertiliser earnings fell 56 percent, which Fazzino said was
due to volatile prices, bad currency hedges, and, as flagged,
the costs of major maintenance at its Mt Isa acid plant.
Fazzino deflected speculation the company may look to spin
off the fertiliser unit, saying the business was still valuable,
with strong assets, dominant market positions, and significant
free cash flow.
"So I'm comfortable with that business," he told reporters.
Explosives earnings grew 21 percent, helped by a recovery in
Australian sales volumes after floods hit coal mines last year,
and by strong growth in its Canadian explosives business.
With the Moranbah explosives plant nearly complete, Incitec
is studying whether to build a large ammonium nitrate plant to
serve coal mines in Australia's Hunter Valley, competing against
the region's main supplier, Orica.
It is also considering taking advantage of cheap U.S.
natural gas prices by building an ammonia plant there.
It plans to decide early in 2013 whether to go ahead with
either of those plants.
Incitec Pivot's shares rose 0.6 percent to A$3.18 after
dipping in early trade, outpacing a 0.1 percent rise in the
broader market. However, its shares have lagged the
broader market's rise so far this year.