A short follow on to yesterday’s post re: the result, to be read in combination.

Good recovery in the Dyno Nobel business. Fertilisers (the ammonia price has doubled and halved repeatedly); vastly more volatile.

IPL have monetised the Wagaman ammonium nitrate plant, and are in the process of selling the fertilisers business. The balance sheet will have material surplus capital, which the company has already committed to returning.

What will be left is a pure play explosives business, which has undergone significant re-contracting of pricing (with a much more rational industry and supply side story) and should be a strong second derivative (downstream play) on the commodity production theme, but without the volatility of commodity prices.

IPL has, at times, been wildly overvalued, relative to any plausible estimate of what the underlying assets could produce. This is most certainly not the case at present.

Good result, we remain happy holders.

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