Incitec Pivot Ltd T.IPL

cibc Q3/20 First Look: neutral C$14

[perplexed01]

The company reported results mostly in line with our estimates with adjusted EBITDA of $242MM compared to our estimate of $235MM and consensus of $243MM. FFO per share was $0.46/sh, the same as our estimate and higher than consensus of $0.45/sh. The corporate segment reported ($77.9MM) FFO compared to our estimate of ($62.7MM) with the variance attributable to one-time transaction costs associated with the sale of the European bulk liquids storage business and unrealized FX hedging loss. NGL processing results were notably higher with $50.9MM FFO compared to our estimate of $38.7MM FFO. The outperformance was driven by higher paraffinic frac-spreads and lower operating costs. Conventional volumes were slightly higher than we expected at 159.8 MBbl/d vs. our estimate of 157.9 MBbl/d. No updates were provided with respect to partnering at the Heartland Petrochemical Complex (HPC) project. The process continues to progress and is expected to conclude H1 2021, although there are no assurances a partner will be found by this deadline. The company is funded to complete the project on its own. During the quarter, the company invested $176.3MM into the project. Total spending on the project to date is $2.9B with an estimated cost to complete of $4B. Approximately 70% of the project costs are de-risked through lump-sum contracts, firm purchase orders and substantially completed design and construction activities. HPC is expected to be in service in early 2022. For the remainder of 2020, capital expenditure will largely be invested towards constructing the HPC with ~$260MM estimated and a smaller amount of $35MM across its remaining business. Sustaining capital expenditure is expected to be $25MM. At the end of the quarter, the company had $2.1B capacity available on its credit facility and maintained a net debt to total capitalization ratio of 44.5%, meeting its covenant requirement of lower than 65%. The company will be hosting a conference call tomorrow, November 13 at 11:00 a.m. ET, dial-in: 1-[phone], no passcode required.