SYDNEY (Reuters) – Australia’s largest fertilizer maker and its biggest listed cattle farmer on Monday warned investors of sizeable losses stemming from floods that engulfed parts of Queensland state, as receding water began to reveal the scale of damage.
FILE PHOTO – The Incitec Pivot company fertilizer and explosive chemical plant is pictured at sunset in Geelong, Australia February 26, 2014. REUTERS/Jason Reed
Flooding rain raked the Queensland coast at Townsville last week, before sweeping inland and submerging vast tracts of outback under record-breaking depths of muddy water.
The warnings from fertilizer producer Incitec Pivot Ltd, hit by the closure of a railway, and Australian Agricultural Company Ltd are the clearest signs yet of the economic impact from the flooding, dragging sharply on shares in the companies.
“On the scale of these floods, it certainly looks like the worst-case, or near the worst-case scenario is playing out,” said Phin Ziebell, agribusiness analyst at National Australia Bank.
RAIL LINE CUT
Incitec Pivot said it had begun shutting fertilizer plants on the weekend at Phosphate Hill in Queensland’s interior after it was cut off by the closure of a railway that runs some 1,000 km (620 miles) across flooded country to port at Townsville.
Idling the plants, owing to lack of storage and ingredients arriving by rail, would cost about A$10 million ($7 million) a week in lost earnings, the company said, adding that its plants were not damaged and the port had sustained only minor damage.
Railway operator Queensland Rail had no immediate comment on Monday, but had said on Sunday that the extent of the flooding had prevented crews assessing damage to sections of the line.
Incitec Pivot shares fell as much as 5 percent to a six-week low, before recovering to close 2 percent lower on the day. The broader market eased 0.2 percent.
Meanwhile, freight company Aurizon Holdings Ltd said it was unable to run its bulk haulage services on the closed line, although it added that the stoppage was “not material”. Its coal railways in the region are open.
Beef producer Australian Agricultural Company Ltd said its Wondoola Station in the Gulf of Carpentaria was the worst-hit part of its operations, adding that it was expecting “extreme losses” from a herd of 30,000 cattle and calves.
Losses from a 50,000-strong herd at three of its other stations in the region were expected to be lower, the firm said in a statement.
It added that a full assessment of the damage may take weeks, while some of its other properties to the northwest and south of the flood zone were still short of rain and very hot.
“The overall impact of these seasonal conditions on the company’s financial earnings for the 2019 financial year (ending March 2019) is expected to be material, and management is currently working through an evaluation of the situation,” AACo said. Shares in the company fell 12.2 percent to their lowest closing price in almost 16 years.
Reporting by Tom Westbrook in Sydney, additional reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Peter Cooney and Joseph Radford