INCITEC Pivot expects its explosives business to drive earnings while it waits for India to buy more fertiliser.
Incitec Pivot on Tuesday reported a $139 million fall in its full year profit, after grappling with reduced demand for explosives in the resources sector, low fertiliser prices and a high Australian dollar.
Incitec Pivot made a net profit of $372 million for the 12 months to September 30, which was down 27 per cent from $510.7 million in the previous year.
Incitec chief executive James Fazzino said an 18 per cent fall in underlying profit was not as bad as market analysts had been expecting but was clearly not where the company wanted to be.
"There's no doubt that 2013 was a challenging year, and the result reflects that," he said.
Earnings before interest and tax (EBIT) in the fertiliser business fell by 37 per cent, and underlying earnings for explosives rose eight per cent.
Mr Fazzino said the fall in fertiliser earnings was primarily driven by the high Australian dollar and low global fertiliser prices.
But the long-term outlook for fertiliser was still good given that the world still needed to feed its growing population.
Mr Fazzino said fertiliser prices were "somewhere near the bottom of the cycle at the moment".
The major issue affecting the fertiliser industry globally was a combination of the decline in the Indian rupiah and India's "rather odd" fertiliser subsidy program.
"Both of those have combined to result in India buying around half the phosphate (fertiliser) that it normally buys," Mr Fazzino said.
But, if India wanted to feed its population, it would have to start buying more fertiliser.
In the meantime, Incitec would continue to try to improve productivity and cut costs.
Mr Fazzino said that in the immediate future Incitec's earnings would be increasingly driven by the explosives business.
In fiscal 2013, the explosives business was affected by difficult global market conditions for hard commodities and the downturn in the US coal sector.
But the explosives business in North America is expected to generate moderate earnings growth, with the mining and quarry and construction sectors picking up as the US economy strengthens.
Mr Fazzino said Incitec would benefit from increased production at its ammonium nitrate plant at Moranbah, in central Queensland, during 2014.
Construction of an $US850 million world-scale ammonia plant in Louisiana in the US was well underway.
Shares in Incitec Pivot were 19 cents, or 7.28 per cent, higher at $2.80 on Tuesday.
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