Incitec Pivot unveiled hope for a revival in world fertilizer prices – even as it said that slide in values, which led a decline in the group's annual profits, looks set to continue into the early stages of next year.
The group, Australia's biggest fertilizer manufacturer, said that domestic nutrient market prospects had improved with the rains which have underpinned expectations for winter and summer crops, so making farmers more likely to fork out to protect yields.
"Water availability in eastern Australia looks favourable as a result of recent rainfall, boosting distribution volume prospects," Incitec Pivot said.
"The wetter-than-average conditions in the second half of 2016 have the potential to drive increased fertiliser demand in 2017."
However, on a global basis, the market would continue – for now - to face the challenge of weak prices, which have been undermined by a boost to capacity as manufacturers have sought to exploit lower values of gas, a major raw material for nitrogen plants.
"The cyclical reduction in global fertiliser prices may continue into 2017," the group said.
"Depressed global fertiliser prices may persist in the short term."
This after reaching levels this year which James Fazzino, chief executive at Incitec Pivot, said twere "either at or somewhere near their cyclical lows with urea and diammonium phosphate (DAP), at 10- and 12-year lows respectively.
Still, Mr Fazzino flagged some signs of improvement further ahead.
"Fertilizer prices will recover in the medium term," he said, reporting some signs of market revival, particularly in urea.
"They're green shoots that have occurred in around about the last month," Mr Fazzino said, noting the impact of a rise in China - the world's largest producer with an output of 90m tonnes – of a rise in prices of coal, a key raw material in the country.
In China, higher coal prices, coupled with depressed fertilizer values, have forced shutdowns at urea producers reliant on using gasified coal to produce gas to make the nutrient.
Incitec estimates this has led to around 9m tonnes of capacity to close in China.
The comments came as the group unveiled a 26% from Aus$295.2m in underlying profits for the year to the end of September, in line with analysts' expectations.
Operating profits in fertilizers tumbled 63% to Aus$81.9m, more than offsetting an improved performance in industrial chemicals.
Group revenues fell 7.9% to Aus$3.54bn.
Analysts predict the company to post 18% growth in underlying profit in 2017.
Incite paid out a dividend of 8.7 Australian dollar cents a share, below analysts' expectations for payout of 9 cents a share.
Shares in the group closed down 1.0% at Aus$2.96 in Sydney.
By Tanya Ahsreena