The market did not like the IPL result from yesterday.

At the EBITDA level, it was a sizeable miss to expectations, driven by declining fertiliser prices, for the most part, in turn caused by the impacts of wild weather on volumes/demand (and in general, the normalisation in commodity prices post the onset of the UKR-RUS war).

Note below the seasonal impacts of argi-businesses on IPL’s half on half cashflows.

Ordinarily, the half just gone is a cashflow drag period, and the current CFO of $147.6m is actually a decent enough outcome, but still, overall, a miss is a miss.

Looking forward, management are very optimistic, expecting a material increase in earnings over the next half, driven by better weather, in fertilisers, and high incentive prices in agricultural products (e.g. wheat) encouraging demand, and ongoing commodity-customer demand across the explosives business.

That’s all nice, but for us, the two key things are a) monetised Waggaman, the US ammonium nitrate plant at near cycle highs and locking in supply at cost b) trades below book value / low single digit PE.

Long run, feeding the world is a solid thematic, and although there is an overhang of uncertainty around the demerger, we remain sufficiently happy holders, and will look past a temporary earnings miss.

IPL will become net cash, once the Waggaman proceeds are received, and whilst the market might be worried about value-destructive acquisitions, the optionality of balance sheet strength and potential capital returns are likewise attractive at this stage of the cycle.

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