The IPL result is out.

The headline NPAT is marginally ahead of consensus, but the buyback and more shareholder friendly language reflect the communication issues it’s had with the market (difference of opinion on how to unlock value).

In general, there’s a lot to like about any slide that looks like this.

And they’ve included an excellent graph on plant reliability. For many years IPL has been “accident prone”, and the improvement highlighted below is a very welcome one, especially given how high current commodity prices are (and thus the losses that result from unexpected downtime/outages).

Performance-wise (partly) the issue for IPL has been a) the market is looking through the boom and b) not valuing IPL at a like-for-like multiple to peers (e.g. ORI in explosives, nor tracking the big fertiliser players).

Overall, we see IPL as one of the few favourably exposed (a supportive price backdrop to what they sell) commodity producers that hasn’t run hard, and is optically cheap on that basis, with a structurally sound thematic (feed-the-world, fertilisers, build-the-world, commodity extraction) with a good balance sheet and solid cashflows.

We’d thought someone might just acquire IPL, given they are ultimately a pretty critical input to supply chains everywhere, and this hasn’t happened.

But, we will take a buyback and otherwise strong capital returns to shareholders as a consolation prize.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

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