Business

Incitec Pivot flags profit hit from train derailment

Incitec Pivot has warned of a heavy hit to its bottom line after a derailment late last month in northern Queensland although the full cost may take some time to be finalised.

The chemicals group said it expected a one-off $14 million hit to the bottom line from the derailment which had resulted in unspecified losses of sulphuric acid.

However, the accident will not affect the full-year production of fertiliser at the group's Phosphate Hill plant, which is expected to be 950,000 tonnes.

Incitec Pivot said it expected full production to resume from the third week of January.

By bringing forward planned maintenance, the group anticipated it would be able to offset the impact of the phosphate production disruption resulting from the lack of supplies of sulphuric acid to the plant.

Queensland Rail owns the track and Aurizon operates the train, while Incitec Pivot owns the rolling stock and cargo.

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An Incitec Pivot spokesman said the three parties only had access to the accident site in the past few days and a full assessment had yet to be finalised.

Queensland Rail had yet to clarify when the planned deviation trackwork would be completed so preliminary rail services could resume.

"Construction of the deviation has, unfortunately, been delayed due to wet ground conditions around the site. However, with water beginning to clear, we expect to complete the deviation late next week," Queensland Rail chief executive Helen Guer​ said on Wednesday.

The cause of the accident at Julia Creek had yet to be clarified. However, it followed heavy rain in the area.

The Incitec Pivot spokesman said the full financial exposure to the accident was unclear, given that company officials only gained access to the site a few days ago.

In particular, the extent of product losses, along with damage to the rolling stock and potential insurance recoveries were uncertain.

Aurizon was reticent about its likely exposure to the incident.

"It's too early to quantify any impact at this stage," an Aurizon spokesman said.

Incitec Pivot informed Queensland Rail mid-week that an additional wagon might also have a very minor leak, which was being treated on-site.

Initially, police had reported leaks from a single carriage with an estimated 31,500 litres of acid having escaped.

"We are unaware of the full extent of the damage and how many acid containers leaked," the spokesman said.

In total, all 26 wagons derailed, along with the locomotive. It was unclear how much of the contained acid would be recoverable.

"I'm surprised by the amount of time the plant is going to be out, due to this accident," one analyst, who did not wish to be named, said. "It is a large profit hit for this incident.

"The fact that the company has not indicated prospective insurance recoveries would appear to indicate there may not be any."

Incitec Pivot has not given any earnings forecast or indicated the effect of changing competitive pressures given the impact of the downturn in the mining sector on the demand for explosives.

Irrespective, most investor interest is focused on the start of its new ammonia plant in the US, where first production is due in the second half of 2016.

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