Why is this ASX 200 stock surging despite a $500 million writedown?

Investors are looking beyond this write-down and focusing on its strong underlying performance.

| More on:
Two colleagues at work looking at a tablet and smiling at a rising share price.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Incitec Pivot Ltd (ASX: IPL) share price has certainly caught the eye of investors on Thursday.

In afternoon trade, the ASX 200 stock is up almost 6% to $2.99.

Why is this ASX 200 stock surging?

Investors have been bidding the fertiliser and commercial explosives company's shares higher today following the release of its half-year results.

For the six months ended 31 March, Incitec Pivot posted a net loss after tax including individually material items (IMIs) of $148 million. This is down from a $354 million profit in the prior corresponding period.

The ASX 200 stock advised that this includes IMIs totalling $312 million after tax. This relates primarily to a $498 million non-cash impairment of the fertilisers business, which was partially offset by a gain on the sale of IPL's ammonia manufacturing facility in Waggaman, Louisiana.

However, investors appear to be focusing more on the company's underlying performance during the half, which was actually very strong despite its loss.

Incitec Pivot revealed that it delivered underlying EBIT growth of 18% compared to the prior corresponding period after adjusting for re-basing items. Management advised that this reflects growth in all customer-facing businesses, including record first half EBIT for the Dyno Nobel Asia Pacific business and the Fertilisers Distribution business.

Pleasingly for shareholders, the loss after tax didn't stop the company from declaring an unfranked interim dividend of 4.3 cents per share.

Management commentary

The ASX 200 stock's CEO and managing director, Mauro Neves, was pleased with the half. He commented:

Our Dyno Nobel and Incitec Pivot Fertilisers businesses have delivered strong underlying earnings performances across the first half, with record first half results in Dyno Nobel Asia Pacific and our Fertilisers Distribution businesses.

Our headline result reflects major restructuring in our asset portfolio across both the Dyno Nobel and Incitec Pivot Fertilisers businesses. After re-basing for these items, and movements in commodities and foreign exchange rates, underlying earnings were up 18%, with growth in all customer-facing businesses. This is a testament to the hard work of our teams across our businesses and reflects a solid platform for future growth.

Outlook

Management advised that it is focused on delivering continued earnings momentum in its customer-facing businesses in the second half of FY 2024. It is also progressing its strategy of transforming the global explosives business to unlock its full potential and deliver improved returns to shareholders.

However, no guidance has been provided for the full year with today's results.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Industrials Shares

drone stuck in a tree representing crashing Aerometrix share price
Industrials Shares

Why has the DroneShield share price crashed 46% since July?

The defence industry is climbing, but DroneShield has been left on the ground.

Read more »

A man dives off a boat into the sea, indicating a share price fall
Industrials Shares

This $1 billion ASX 300 stock is up 35% in 2 weeks. Here's why it's diving deep today

The high flying ASX 300 stock has come under heavy selling pressure today. But why?

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Earnings Results

Brickworks share price jumps 7% on FY24 earnings beat and dividend increase

The company's profits didn't fall as much as expected in FY 2024.

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Industrials Shares

This $6.5 billion ASX 200 share just crashed 12%!

Trading conditions have become tough for this stock. Let's see what's happening.

Read more »

a man in a business suite throws his arms open wide above his head and raises his face with his mouth open in celebration in front of a background of an illuminated board tracking stock market movements.
Industrials Shares

This ASX 200 stock just jumped 5%. Here's why

Investors are cheering on an update this morning. Let's dig deeper into it.

Read more »

A silhouette of a soldier flying a drone at sunset.
Technology Shares

What's the bull case for the DroneShield share price right now?

Can the counter-drone technology company continue its run?

Read more »

Successful group of people applauding in a business meeting and looking very happy.
Industrials Shares

Guess which ASX All Ords share is jumping on $670m contract win

A big contract win has been announced in the United States.

Read more »

Vanadium Resources share price person riding rocket indicating share price increase
Industrials Shares

Why is this ASX defence stock rocketing 23% today?

What is getting investors excited today? Let's find out.

Read more »