Incitec is currently enjoying something of a “once-in-a-lifetime-boom” with fertiliser prices through the roof, a function of the broader macroeconomic environment that has driven all commodities, as well as the RUS-UKR war specifically.
That aside, it is worth noting that IPL has turned itself around, somewhat, over the years, with a much-improved track record of free cashflow generation (from an abysmal one just a half-decade or so ago).
Gearing is low, as befitting a cyclical company with little real control over price, or that of its operating environment (however much one might wish to think explosives have any duopoly like tendencies).
The market does not expect presently elevated prices to remain. Already Tampa spot has declined some 30% or so from its peak, which is what the below consensus forecasts generally depict. If prices surprise to the upside, IPL will (unsurprisingly) do well, by definition.
To a degree, it is a portfolio hedge. The company is trying to do things it thinks will crystallise value (remove a holding company discount, remove market-implied dis-synergies, operationally, or otherwise) but the main reason, a little like owning O&G at this stage, is in case the war drags on, and supply chains do not normalise, meaning that the food crisis (and the associated demand for fertilisers) continues.
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