Good morning, and welcome to Incitec Pivot Limited's 2023 full year results briefing. I'm joined this morning by our Interim CEO, Paul Victor, and our Interim Chief Financial Officer, Liza Somers. The materials we'll be covering today have been lodged with the Australian Securities Exchange and can be found on the ASX and Incitec Pivot Limited's websites. At the end of the presentation, we'll have time for questions, and an audio recording of this presentation will be available on the company's website. I'd like to draw your attention to the disclaimer found on slide two ... and on slide three. Before we move into the main presentation, I'd like to start with an acknowledgement of country. I'd like to acknowledge the traditional custodians of the land we are coming to, to you from today, the Bunurong Boon Wurrung, and the Wurundjeri Woi Wurrung peoples of the Eastern Kulin Nation.
I pay my respects to the elders past, present, and emerging. Thank you, and now I'd like to hand over to Paul.
Thanks, Geoff. Good morning, and welcome, everyone. I'm very pleased to be here today to announce IPL's full year 2023 results. Since June, when I stepped in as interim CEO, several actions have been taken with the board and the executive team to ensure we safely deliver business results more aligned to the shareholder and stakeholders' expectations. It's part of our transition from a good company to a great company as we work to separate and set up our two leading businesses. When we look at what we have accomplished to date, there's a lot to like, but there's also a lot more to do. As you will hear today, we are providing shareholders with a significant capital return and a ticket to a better business with a stronger earnings profile, led by a focused and talented team.
When it comes to the work ahead, a high-performance culture is the catalyst to get us from good to great, and today I will start by explaining the cultural shift we have been making during the transition. I'll then focus on safety as our number one priority before providing an overview of our business performance and the progress we've been making on our strategic initiatives and value drivers. Lisa will then take you through our group financial performance. Then, before we open up the Q&A, I will give you a look at what's ahead. Looking now at how we are navigating the transition. At the center is a cultural shift away from explaining our performance to taking full accountability to, and the delivery of, managing performance targets.
It starts at the top, and there's a renewed focus of the executive team, whose performance objectives are aligned to the safely, to safely creating a stronger business result. In our high-performance culture, our people are expected to deliver business results safely, with focus and realism, while taking full accountability to deliver promises made. We have shifted to setting realistic targets aligned to stakeholder expectations and are being more transparent in how we are tracking. This is crucial when it comes to delivering on our promises. Already, there's encouraging progress with a much-improved second half 2023 set of results. Judging by the last quarter's run rates, we have the best opportunity to deliver improved, sustainable year-on-year growth in underlying performance, which is aligned to the stakeholders' expectations.
During the transition period, we've placed an even greater emphasis on safety, which will always be our number one priority. When we look closely at our Zero Harm metrics, we are very pleased that we've made improvements in Financial Year 2023, including a reduction in the Recordable Injury Severity Rate, the most serious incidents possible. We've also significantly improved process safety Tier 1 and 2 events and had no significant environmental incidents for the third year running. However, we are disappointed with our rate of recordable injuries, which has not significantly improved and is above our 0.7 target. The results, in part, reflect a number of changes occurring across the business over the past year. It is clear we need to deliver a much-improved safety culture. We owe it to our people, we owe it to our customers, we owe it to our stakeholders.
Going forward, we are targeting a 20% improvement in our TRIFR rate for Financial Year 2024. This will incorporate our Titanobel business, which will be included in our safety reporting for the first time in Financial Year 2024. We are taking action via a company-wide safety campaign, including a safety breakthrough activity across all our locations and all of our sites. Our top 100 leaders are also being supported to take greater ownership and accountability for the safety and wellbeing of their teams. As leaders, we believe that Zero Harm to our people is possible and will not stop to send our employees safely to their loved ones on a daily basis. Focused businesses are safe businesses, and safe businesses leads to strongly performing businesses.
Looking now at our Financial Year 2023 result, which is mixed and reflects, A, a lower commodity price environment, and B, an improvement in the second half underlying earnings, which aligns with our undertaking to the market in May. Our global explosive business is really performing well and is on track for a great Financial Year 2024. Our fertilizer business didn't have the best years, and with our renewed focus, we are confident in delivering improved results. We delivered EBIT of AUD 880 million, which is the second highest since 2008, and our AUD 701 million operating cash flow remains strong off a record last year.
We've also announced today a final dividend of AUD 0.05 per share, bringing the total full year dividend to AUD 0.15, which represents a 50% payout, consistent with our capital allocation framework. As expected, our ROIC of 7.5% has been negatively impacted by commodities. However, we are looking at various ways to improve the return on assets, which I will share with you during the presentation. I'm pleased to announce that subject to the Waggaman sale completing, which we expect will happen on December first this year, we will be increasing our capital return program by an additional $1 billion. This is on top of our previous commitment to return up to $400 million via on-market buyback. We are very happy to be able to reward our shareholders with a significant capital return.
It is a result of our strategic decisions to first invest in the Waggaman facility, and then to monetize the asset at a favorable time in the commodity cycle, which also underpinning the long-term cost base of our Americas Explosives business. This has been a terrific investment that has delivered for our shareholders, and it will be great to get this money back in the pockets of our shareholders. Our $1.5 billion capital returns represents approximately 25% of capital being returned, or $0.72 per share, and Lisa will provide more details on how we are rewarding our shareholders later. Across our business in the year ahead, we will be considering what further actions are needed to deliver cost efficiencies to optimize the cost base. As we work through these details, we'll have more to say in the coming months.
Our balance sheet gearing levels are elevated compared to last year, but still significantly lower than our risk tolerance level of 1.5 times Net Debt to EBITDA. The focus on improved cash flow generation, better quality of future earnings, and the potential sale of the fertilizer business will result in improved gearing levels. Looking now at our Dyno Nobel business, which exceeded expectations and delivered solid results. This was despite inflation and commodity price challenges in North America. In our Dyno Nobel Asia Pacific business, we are very pleased with the progress of our customer recontracting. It is going according to plan and expected to deliver a return to peak historical earnings by Financial Year 2025.
Several key contracts have been executed in Financial Year 2023, including our recently announced contract extension with Fortescue at the Western Australian Pilbara operations, and I have more details to share later in the presentation. In the tight market on the East Coast of Australia, we are taking a disciplined approach on price and margin. At our Moranbah plant, reliable operations resulted in record iron production. Our DNAP International business had a very strong year, with volumes up 32%. Titanobel also delivered in line with the acquisition case and has shown we have the capability to penetrate new markets. Our Dyno Nobel Americas explosives business had a better second half-year result and a very strong last quarter, providing good momentum as we enter Financial Year 2024.
For those on the call that are having difficulty hearing, can we ask that they go on to the webcast, rather than dialing into the conference call? We'll continue on, and we apologize for any of the inconvenience that you're getting on the call.
Still remaining on this, on this slide, reflecting on Dyno Nobel's performance. The business completed customer repricing and a, and a cost-out program called Project Agility. This was a hard look at our structural cost base in a highly competitive North American market. The full benefits of these two initiatives were eroded due to upfront, cost of implementation, softness in the coal market, and a higher than expected inflation. However, full benefits are expected to flow in the first half of Financial Year 2024. Importantly, our product offering continued to yield the best, returns when compared to our competitors in North America, with a strong $ per ton margin. The manufacturing performance of the business was however mixed. At Waggaman, we operated above nameplate capacity, and year-on-year earnings were in line with ammonia price movements.
However, our Ag & IC assets were impacted by commodity prices, a planned turnaround, and unsatisfactory manufacturing performance. Later in this presentation, I will explain more about our improvement plan to address this. The business enters Financial Year 2024 with momentum that will continue to build, and I want to take the opportunity to recognize Greg Hayne, Braden Lusk, for the hard work that they and their teams have put in to deliver this result. They also assure me that more is to come. Now to our fertilizer business, where earnings were impacted by a challenging market. This included the lower DAP prices, unsatisfactory manufacturing reliability, and higher additional gas supply costs. The distribution side of the business had a very strong second half, with year-on-year improvement on products sold.
Our strong brand and unrivaled distribution network contributed to a 9% increase in domestic fertilizer sales. This mitigated slightly the reduced margins that we experienced. We are disappointed with the manufacturing result, which was largely due to unexpected reliability issues at Phosphate Hill. Production of 864 kilotons was well short of nameplate. We have initiated a Phosphate Hill reliability task force to address reliability issues. More broadly, across the business, we are implementing a manufacturing reliability improvement plan, which I will comment on soon. The EBIT impact at Phosphate Hill from sourcing shortfall gas due to the ongoing gas supply curtailments was AUD 79 million, at a lower end of our AUD 75 million-AUD 90 million range.
Into Financial Year 2024, additional costs due to the sourcing of shortfall gas is expected to be around AUD 35 million, which is AUD 44 million less than the prior year. The management team under Sunil Salhotra's leadership has done exceptionally well to deliver the most affordable gas to Phosphate Hill, and I am encouraged that the gas costs will be significantly better in Financial Year 2024. I'll look now at the good progress we've been made to deliver sustainable and competitive returns to our shareholders. Work continues to reshape our portfolio as we transition to the leading pure-play explosives business, and I will explain this more in detail on the next slide. When it comes to margins, in our explosives business, our price discipline and sales growth has positioned us for success. Our premium technology is helping us secure customers.
Our electronic detonators and premium emulsions have revenue growth of 24% and 16% respectively since 2019. Robert Rounsley and the technology team's efforts are paying off handsomely in delivering fit-for-purpose technology, which is integrated with our customers' value chains. The manufacturing excellence strategy, implemented in 2018 and 2019, has so far produced mixed results. We know more work is needed to drive reliability and higher asset returns. We have had successful performance and reliabilities at plants such as Moranbah and lessons learned from our performance at Phosphate Hill, where, as I've mentioned, we have initiated a task force to fix the reliability issues. Stephenie De Nichilo and the global manufacturing team are taking this head-on and plans have been developed to address the known risks. Key to our long-term success is our decarbonization strategy.
We are committed to our Net Zero 2050 ambition and operating as a sustainable business for the future. We are purposefully progressing our plans, our plans. Taking a closer look at how we are reshaping our portfolio to reduce commodity exposure, increasing earnings, and improve capital allocation. In March, we announced the sale of the Waggaman ammonia manufacturing facility to CF Industries Holdings for $1.675 billion. This increased our level of recurring earnings and will also ensure security of supply of ammonia. We secured a 25-year cost-competitive ammonia supply agreement. This will provide us up to 200,000 short tons, 200,000 short tons of ammonia a year to support the business. The sale is expected to close on December 1st, 2023, subject to receiving regulatory approvals and finalizing other closing conditions.
The process for the sale of our fertilizer business is progressing. Due diligence has been completed, and we will provide further updates in due course. Looking more closely at our technology, which is delivering on our strategy and to enhance our earnings growth. In our explosives business, our technology continues to deliver better safety, productivity, and sustainability outcomes for all of our customers. As you can see here, our continued focus on price discipline has resulted in revenue growth significantly outstripping volume growth. In our fertilizer business, we have successfully integrated Yara Nip ro into our liquids offering Easy Liquids. The new products and services have been in demand from customers attracted to the benefits, including security, supply security, as well as specialty blends. This is providing farmers with good yield outcomes across a variety of segments, including broad acre, horticulture, and tree crops.
In our explosives business, our technology solutions are giving us a competitive advantage and driving up margins. We are focused on providing customers with the practical solutions they need and safeguarding this for the future by accelerating development. In Financial Year 2024, the team will have 11 technology initiatives moving from development to commercialization. A great example of our strategy in action is a long-term contract extension we announced last month with Fortescue to supply the Pilbara operations. The commercialization of a lower emissions Differential Energy explosive method is just one technology that Fortescue and other customers will benefit from. The agreement has a strong focus on decarbonization, and we will invest AUD 5 million in new technologies to support Fortescue's decarbonization efforts. This is a great example of our technology attracting customers and how we are working towards robust, recurring annual earnings growth from our technology.
Once again, thanks, Greg, Rob, Braden, and their teams for delivering this result. As I've said at the outset, it's crucial we deliver on our promises, and we are transparent on how we're tracking. Here, and on the next slide, we will provide you a summary of the promises we made and how we're delivering against those. In Dyno Nobel Americas, our promise on margin, discipline, and cost reduction has been partially met this year. The full benefit is expected in financial 2024, when we target a mid to high single-digit growth in the explosives EBIT. This excludes the anticipated benefit from the Waggaman offtake agreement. Further details on the expected earnings impact from the sale are outlined in this presentation's appendix and profit report. In our Dyno Nobel Asia Pacific business, successful recontracting will see the business return to historic peak earnings by financial 2025.
The team will also work tirelessly to go even beyond that level. We have fulfilled our promise to secure long-term gas supply at Moranbah, which has locked in competitive advantage of the plant for the next decade. Sunil, Greg, and a dedicated IPL team did phenomenal work to secure a long-term cost competitive position. We have also grown in new markets and successfully delivered the Titanobel acquisition business case. Our Europe, Middle East, and Africa expansion strategy is now also includes an agreement with a Saudi counterpart to investigate the development of an ammonium nitrate plant in Saudi Arabia. The agreement aligns our long-term strategy to grow our EMEA footprint and has the potential to evolve into a joint venture. We could provide ammonium nitrate to our EMEA mining customers. Let me be very clear. We will only pursue disciplined growth aligned with our capital allocation framework.
Turning to our fertilizer business, and as I've mentioned, the sale process is making the necessary progress. At our Phosphate Hill plant, reductions to gas supply continue to be mitigated, with the impact in financial 2024 expected to be more than 50% less than in financial 2023. On the distribution side of the business, the Perdaman project continues to progress, with the urea supply expected to be delivered from late financial 2027. Also thanks to the team that has delivered this significant agreement, led by Chris Opperman, as well as Scott Bowman. As I've mentioned, manufacturing performance has been mixed. We had a record iron production at Moranbah, record performance at Waggaman, and a successful, safe, major turnaround completed at Cheyenne. However, we must deliver safe, reliable, and cost-competitive operations across all of our plants.
This position is not negotiable for all of us at IPL. We have developed and updated a manufacturing reliability plan to guide our improvement changes. It includes a complete external review of our manufacturing assets, namely Phosphate Hill, Cheyenne, LOMO, as well as Moranbah. The plan will embed clear site-level accountability for performance delivery. There will also be a focus on enhancing a pipeline of leadership talent. Additional focus is also required at Phosphate Hill. Taking the lessons learned from Waggaman, we have deployed a reliability task force. Given our successful result with a similar task force at Waggaman, I see no reason why we cannot get the same positive results. Our people at the plant are committed to addressing the issues and to improve this very important asset, which produces high-quality product for all of our customers.
Our dedicated team are working tirelessly to stabilize the plant's operations and ensure performance in the long run, and I want to thank the team led by Peter Weir for their commitment. Following an incident in the ammonia plant, coupled with some needed maintenance work that we need to do in November, the plant will return to full production rates at the end of this month. We expect financial 2024's production to be between 810 and 840 million KT. Yeah, let me repeat. We expect the financial 2024 production to be between 810 and 840 kilo metric tonnes. The task force will be focused on ensuring that the plant meet these expectations and return to safe and reliable operations.
Turning now to how we are prioritizing our response to an urgent challenge of climate change, as well as delivering sustainable returns. Our approach has far-reaching support, and with our integrated Net Zero strategy, overwhelmingly backed by almost 90% of our shareholders at our AGM in February this year. We have made progress on our approach to Scope 3 greenhouse gas emissions, mapping them throughout the value chains of our two businesses. We are also implementing how we will reduce these emissions. We have progressed key decarbonization projects at Moranbah, LOMO, and Gibson Island plants to deliver our promise of a 25% absolute reduction in Scope 1 or 2 greenhouse gas emissions by 2030.
Sunil and his team, including Daryn Jarvis, as well as Karen Durant, have really led these actions from the front and positions us so well to deliver sustainable business results going forward. I will now hand over to Lisa to take us through the group financial results. Over to you, Liza.
Thank you, Paul, and good morning to everyone on the call today. I'll pick up on the themes that Paul raised earlier and address the areas that we are focusing on for sustained financial performance. As Paul mentioned, the group EBIT number of AUD 800 million follows a strong second half underlying performance, supported by explosives business growth, customary pricing benefits, and strong fertilizers distribution sales volumes. The group's EBITDA conversion to operating cash flows remained robust during FY 2023, underpinned by this growth and a decrease in working capital levels compared to FY 2022. Return on invested capital decreased on a headline basis compared to FY 2022, from 13.8% to 7.5%, as a result of the fall in commodity prices.
Excluding the impact of commodity price movements and the closure of our Gibson Island manufacturing facility, return on invested capital improved by approximately 60 basis points, supported by underlying technology and customer growth. We are committed to pay out a competitive dividend to our shareholders, and we are pleased to announce a final dividend that will bring our full year dividend payout ratio to 50% of net profit after tax. With increasing inflationary pressures during the year, our cost base continued to be a major focus area for us. Our cost base increased year-on-year, largely relating to the full integration of business acquisitions, business growth, and one-off cost associated with the execution of strategic initiatives. Additionally, we experienced cost increases of approximately 2 percentage points above the average group inflation rate for the year.
We actioned focused initiatives to combat these increases, including passing on AUD 67 million of cost increases through agreed customer contract pricing mechanisms. As we progress through FY 2024, we are continuing our focus on saving initiatives, and we are currently working on plans to optimize the cost base, taking into account the anticipated strategic asset sales. Moving on to the next few slides, I'll go through some of the key points surrounding our working capital, capital spend, and an update on capital allocation. Absolute working capital decreased overall by AUD 42 million from the prior year. Firstly, the net impact of transferring the Waggaman assets to a held for sale category and the Gibson Island manufacturing facility closure contributed to a AUD 7 million net increase.
Secondly, international business growth in the DNAP business resulted in higher working capital balances of AUD 20 million during the year, which was coupled with strong EBIT growth as we further expand our international footprint. These impacts were offset by lower commodity prices and management actions on working capital initiatives, which led to an AUD 74 million decrease in working capital. The trade working capital as a percentage of sales for the explosives business increased from FY 2022. The prior year saw a temporary decrease in this ratio following peak commodity prices, resulting in higher revenue balances during the prior year. The ratio in FY 2021 is largely in line with FY twenty... The ratio in FY 2023 is largely in line with FY 2021 levels, with international business growth being largely offset by focused working capital initiatives.
The trade working capital to revenue ratio for the fertilizer business had a reset of approximately 1.2 percentage points following the closure of the Gibson Island manufacturing facility. The remaining increase in the ratio during FY 2023 is largely due to lower commodity prices, following a peak in revenue in the prior year. Further actions are continuing in FY 2024 to improve working capital metrics, including maintaining optimal inventory levels and addressing our debtor and creditor days. Working capital remains one of our top priorities, with a focus on maintaining all controllable factors and achieving sustainable working capital levels for the business on a go-forward basis. The next slide outlines the capital investments we are making to drive growth in quality earnings. Sustaining capital spend for the group totaled approximately AUD 200 million, which is in line with the range previously announced.
Other major capital spend includes the Cheyenne turnaround, which was successfully completed in the year. We have made significant investment to improve the sustainability and reliability of our assets during FY 2022 and FY 2023. Despite the increased rate of spend, we kept sustenance investment below 80% of depreciation. We maintained momentum in the execution of our growth strategy and sustainability investment, with spend being incurred on projects that have a forecast internal rate of return that exceeds our cost of capital in line with our capital allocation framework. Capital expenditure is continuously reviewed to deliver the most optimal levels of spend to ensure long-term asset reliability and delivering the best return on invested capital.... Moving on to our capital management program. As Paul mentioned, assuming the Waggaman sale completes, we intend to use those proceeds to undertake a capital return program of up to $1.4 billion.
This includes the previously announced AUD 400 million on-market buyback. The additional AUD 1 billion is expected to be returned to shareholders via a combination of a AUD 500 million pro rata capital return and an additional AUD 500 million on-market buyback. The split between capital return and buyback is designed to balance the objectives of returning cash quickly and returning it efficiently from a tax perspective. This apportionment between the two forms of return remains subject to confirmation by the Australian Tax Office of the deemed dividend component of the pro rata capital return. This level of capital return is likely to represent a return of approximately 25% of IPL's issued capital. It will require approval from our shareholders, and subject to the Waggaman sale's completion, resolutions will be included in our notice of meeting for our AGM, scheduled for 20 December.
Any additional on-market buyback will follow on from the existing AUD 400 million buyback. We look forward to getting the buyback program underway as soon as we have the next permissible trading window available. Further updates will be provided to the market once more information is available on the outcome of the Waggaman sale. With that, I'll now hand back to Paul, who will take us through the outlook for the FY 2024 year.
Thanks, Lisa. As we entered Financial Year 2024, we are well positioned for underlying earnings growth across both our businesses due to favorable market conditions and our strategic process, progress. In our explosive business, our premium technology will provide a competitive edge in the market that is placing more focus on value over cost. Profitability is also expected to grow due to continued commercial discipline and a sharper focus on managing costs. Our Dyno Nobel Americas business is targeting a mid- to high single-digit earnings growth in Financial Year 2024. In our Dyno Nobel Asia Pacific business, we are positioned to return to historic peak earnings by Financial Year 2025, following good progress on our recontracting with customers. In our fertilizer business, we are targeting accretive market share gains in the distribution business, backed by strategic customer offerings.
To reemphasize, the team and I are fully focused and committed to delivering improved reliability at Phosphate Hill. I've covered a lot of detail this morning and also deliberately so. I'm proud of the achievements of our two leading industry businesses, and I'm very excited by the challenges and opportunities ahead. As I've said at the outset, there's a lot to like, but a lot more we can do as we provide our shareholders with a better business and a stronger earnings profile. Shifting to a high-performance culture, our executive team have clear accountabilities to deliver on the areas we have covered today, including cost discipline, manufacturing reliability, and customer growth. We know what's working well and what requires renewed focus. On that note, I will end the formal presentation of this morning.
I know that we have had some technical difficulties during the morning on some people dialing in on certain lines, and apologies for that. I will ask Geoff to briefly help us navigating how we're gonna facilitate the Q&A section, to make sure that all questions are being brought in the room and answered appropriately by management. Geoff, over to you.
Okay. Thank you, Paul, and I also apologize for those technical difficulties that people have had. Hopefully, you've been able to get onto the webcast and hear our presentation through there. Unfortunately, because of those difficulties, we can't take questions verbally, but we are receiving some questions coming through via text. So please, if you do have a question, you can text me, Geoff McMurray. My details are at the bottom of our ASX release today, so you can get my phone details there. But we do have a few questions, Paul, and the first one comes from Richard Johnson at Jefferies. "The capital structure, please remind me what the appropriate capital structure is for an explosives standalone business, and then also what it would be if it's continuing to be a Dyno and fertilizer business?
Thanks, Richard, for that question. Well, basically, they, there should be very limited difference between the capital structure for the explosive business as well as for the the Dyno-- well, IPL integrated business. But it doesn't take away that, you know, at some stage we have to have a relook at it. So let's go back in terms of what we said before. When we announced our capital allocation framework, we did make it quite clear from a balance sheet perspective where we plan to manage the risk levels of the business, and that would be to maintain a gearing level of 1.5 times Net Debt to EBITDA. That was the one key pin that we actually put in the ground.
Then, associated with that, we also kind of to say to maintain that capital structure, that we ultimately don't want the debt to be above AUD 1 billion. We were clear about that. Especially when you go into a dyno business, you do want your debt levels to be significantly lower to where, where they are today, because the balance sheet cannot afford AUD 1.6 billion in a dyno alone or explosive alone business. It needs to be at AUD 1 billion and less, and we do believe that we can set ourselves up for that... In this capital structure, we also believe that, the dividend payout, you know, can be in that 30%-60% payout range, as we also don't anticipate anything significantly different on that.
The way that we look at investments, and differentiate our investments, from, typically buybacks, again, we said we want to reward our shareholders by achieving a 1.3 times over WACC level, and that will also kind of stay the same. So where we are before we actually now kind of, progressing towards finalising, a fert sale, we will kind of upkeep these, capital structure principles for IPL. It will warrant us to have a relook at the, at those once we have successfully completed the deals, and ultimately a relook at our dyno business and explosive business and where we want to take that forward. So we may need to come back in future and update you on the specifics or any potential changes to the capital structure needed for the explosive business on a standalone basis.
So there's a little bit more work on that to be done, but other than the absolute debt levels, I do think the capital allocation framework will stay very much intact. Thanks, Richard.
Yep, thank you. Richard had a follow-up question: Should we assume that the on-market part of the buyback, so AUD 900 million of on-market buybacks, will they be completed evenly over FY 2024 and 2025?
That is the objective. I think the first thing that we need to point out is that ultimately, we will only be able to go into the market once we have clarity on the kind of the fert sales process. As we stated in our documents, that's the one thing that at this stage prevents us on getting into the market and buying back shares. But once we have achieved that, kind of that objective, we will go into the market with the objective to evenly buy back shares. Of course, we'll look at areas where there's opportunities, more than others.
You know, sudden drops in share price will provide us with an opportunity to buy back shares, and if that opportunity is greater than other times, we will kind of definitely kind of look at those from an opportunistic perspective. But overall, the drive is to do it evenly over the next two-year period.
A third question from Richard: Does the change in chairman delay or accelerate the CEO appointment?
I think that's probably a question above my pay grade, Richard. I do believe that the board has all intentions to very expeditiously appoint the CEO of the business. That's kind of a very needed outcome that the board needs to oversee as part of their duties. I've got no reason to believe that the board will not execute their duties as diligent in the past as at what they will do in the future in appointing the CEO. And we will afford Greg the opportunity to speak and engage with shareholders and update them on where they are with the process and how soon they actually want to bring this process to a close.
Okay, moving on to James Wilson from Jarden. His question is: Given the upcoming turnaround of Phosphate Hill, which is not until 2026, as well as your increased debt balance, are you able to walk us through how you think gearing will evolve going into next year?
Yes, so ultimately, where we are... Well, let's talk about Phosphate Hill, and its contribution to the overall profitability of of IPL and in the ba- what's gonna happen on the balance sheet. On the balance sheet, the key catalyst to a lower gearing level will, of course, be the closure of the Waggaman deal. And we do know that, you know, it will take us some time to effectively execute the buyback program, which effectively will mean that our debt levels will significantly reduce. Actually, virtually, you know, on a net debt basis, go to close to to zero.
We know that underlying, if we look at the business, that the cash flow generating ability of our explosive business is extremely high, and the cash conversion of earnings into cash of that business is also much non-cyclical. So we do anticipate that those cash flows will further reduce our gearing levels quite significantly over the next couple of months. With the fertilizer business and where commodity prices sit at this point in time, and our envisaged commodity prices, we do believe that it will have a less profound impact on the balance sheet from an earnings perspective and a de-gearing perspective, as well as the capital requirements is not that extensive, that will ultimately require us to gear up to actually fulfil those capital requirements.
So we actually anticipate in the next year, a situation where our balance sheet will be very low geared. And if we're successful in completing the fert sale, you know, it will actually kind of cause a significant further deleveraging of the balance sheet to probably a deleverage level, with all those cash proceeds coming onto the balance sheet. So we mostly look at a year and two years ahead of very low gearing because of the cash flows that hit the balance sheet and then, over time, gearing it up with the buyback program as we announced.
Another follow-up question from James: Are you able to give us some additional color or the potential earnings impacts of a significantly lower production outlook in 2024 at Phosphate Hill?
I think it's very difficult for us to really make, you know, kind of a statement on what that profitability would be. I mean, you all know ultimately what the DAP prices publicly stated that DAP prices are, and the forecasted DAP prices that gets released by, you know, kind of credible houses such as IHS Fertecon. You know, and we have given you a kind of an indication of what the volume ranges is of for that asset. I think it would be very you know, easy to calculate the you know, kind of the profit impact of that.
I will say, when I look at Phosphate Hill, the positive catalyst is the fact that we significantly reduce our gas exposure in terms of the cost of the top-up gas. As we've said, that would be AUD 44 million lower, and that would be a very strong positive catalyst. Also, there may be some other positive catalyst in cost management that would be year-on-year, significantly lower than what we've seen this year. And what I can also say is we have completed the litigation with Rema Tip Top, which will also kind of positively impact our Phosphate Hill result in the order of around about AUD 16 million in the new Financial Year.
On the negative side, of course, is this 50,000-60,000 tons of product that, the market probably would have pencilled in, and, kind of where we will operate now because of the incident and the maintenance work that we need to do in Phosphate Hill, that will reduce the profitability to some extent. I think the pluses and minuses will kind of balance each other out, and it will probably be a net positive on earnings, even for Phosphate Hill, having the lower production value. So I don't anticipate that being a significant negative catalyst on a net basis for the overall IPL earnings.
Okay, the next question comes from Daniel Kang at CLSA, and it's along the same lines: With Phosphate Hill, given the lower AUD 45 million cost impact from gas shortfall and the interruptions of FY 2023, where do you see the realized cost per tonne in FY 2024, and where do you see the realized cost per tonne at a sustainable level? And just as a follow-up to that, has a longer-term gas contract been secured for the shortfall gas?
Okay, so I'm gonna ask Lisa to help me a little bit on the, on the cost side. So let us just highly frame what we've said before. If one look in terms of the cost per ton for Phosphate Hill, prior to the past two years, the past two years, you know, from a throughput perspective, we know our production levels were lower. They were not in the upper 900s, which they had been in 2020 and 2021. Thereafter, actually, it came down from the 900s into the 800s and 700s due to the turnaround and the production performance that we've had over the past year. So production-wise, we haven't hit the targets, and that will ultimately have an impact on the AUD per ton basis.
We also haven't had the greatest of cost performances this past year due to the instabilities that we've experienced, and that also contributed to the, you know, dollar per tonne being on the negative or on the back foot, as well as the top-up gas. So those three things have resulted in us actually having a, let's say, around about a AUD 500 a tonne position on Phosphate Hill to be slightly above AUD 700 a tonne. So if one stand back and you look at it, you roughly have a AUD 200-AUD 240 a tonne increase on Phosphate Hill.
My analysis when I looked at it is, the biggest component, or let's say 60% component of that, is the top-up gas, and then 40% of that is the higher cost and lower production. So ultimately, what we envisage for the next year is with the top-up gas being lower year on year, as I've said, as well as us not envisaging to have that level of additional cash fixed cost that we had in 2023, that we anticipate around about AUD 650 a tonne-AUD 700 a tonne. It will be in that range. In terms of the cost competitiveness for the next year, the production is not at that higher level, but we anticipate the cost being lower on gas and cash fixed cost, as I've said.
On a sustainable basis, Dan, as I've said before, you know, when we produce at levels of 900,000 tonnes and above for Phosphate Hill, and even if us having a top-up gas at levels of, let's say, AUD 12-AUD 14 per gigajoule, we will be able to actually operate that asset between AUD 600 and AUD 650 a tonne. We don't envisage that would be significantly lower than that going forward, but, you know, 600, 600 to 650 is what we envisage at this point in time, being a more sustainable level.
But let me ask Liza whether she has more to add in terms of that, because I know she has been intimately involved in all the cost and all the reliability efforts that we currently have ongoing.
Thank you, Paul. Yeah, I'll probably just add to that, that the cost of sulfur, which is also very linked to the DAP price, often have a movement or impact on our Phosphate Hill cost per tonne, and should be looked at also together with DAP price movement. So as DAP price goes up, the sulfur moves as well. So that could have an impact as we move into the next year. But our prediction for next year is around AUD 700, around that number. So, that's probably all I have to add. Paul?
Thanks, Liza. And then on the gas contracts, as I've said, Sunil has done some great work, to work firstly on the current gas contract quite closely with, PWC, and ENI, to see kind of how we can, get a resolve of what the throughput and gas production would be, for the next Financial Year, which is Financial 2024, the one that we're in. I think Sunil and the team is doing some great work to ensure that, we honour the offtake, and the supply of gas in terms of the current gas contract as far as possible. We do anticipate that there may be some shortfall, and as required to actually have some top-up gas in the next F inancial Year. Well, in Financial 2024, apologies.
We know that this is a dynamic situation, you know, so we are continuously having conversation. We're giving, getting some updated information. We know that PWC and ENI are doing all efforts to kind of to restore and honor the contract, and kind of see what they can do in terms of getting the field to produce back on its targeted level. So we need to kind of be a little bit patient and see kind of that, how that kind of plays out. But I can assure you that all the right resources and focus is on that, and by judging by the year-on-year top-up gas level, you can already see that we are making good progress.
Sunil and the team has also done some great work to secure top-up gas from other sources, should we need it, and if we don't, then ultimately, you know, that's also great. Our focus is to get as much as volume delivery from the current contract as possible. You know, this current contract runs for another couple of years, and we will stand by the current contract that we have with PWC, until such time that we need to kind of secure gas beyond that contract period, which is still a couple of years ahead of us.
Thanks, Paul. Then a follow-up question on Dyno Asia Pacific recontracting, what portion remains to be negotiated? And remind us what peak earnings for DNAP is.
Yeah, as I've said, I'm really pleased with the work that Greg and the team has done here. They've really done fabulous work. And in Financial Year 2023, we've seen, you know, kind of two major contracts of the pool of contracts was secured. FMG, we spoke about. We also completed the Glencore contract, which was also a kind of a big contract for us to complete, and then others as well. So I will say that we're probably around that 30-35% mark of contracts completed. We know the next phase for Financial Year 2024 is kind of a bigger sizable chunk of contracts that we need to complete, and Greg and the team has done a lot of work so far.
Hopefully, we can update the market on the progress and the outcome of that. But at this point in time, things are really going according to plan, and we're quite comfortable that you know in terms of the recontracting, the objectives that we have for Financial Year 2024, which would be probably the lion's share of the contracts that needs to be renegotiated, that would be completed in 2024, and then the remainder tail end of the contracts that needs to be completed into Financial Year 2025. So let's say by mid-Financial Year 2025, all contracts would be you know finally agreed and being brought into operations, or beneficial operations, if I can call it. But that's the way that we schedule it.
We have no reason to believe that we're not keeping, you know, kind of track on it. And if we are not secure, securing certain contracts, which have happened, over the past year, Greg and the team, due to the shortness of the market and our commitment to price discipline, has very quickly, you know, kind of found a new house for, for the, for the AN, and hence, you know, kind of we're quite comfortable with that we can still achieve those return to peak earnings, as we said. As we mentioned, you know, your second question on what do we anticipate the level of peak earnings would be?
Remember previously, they were between AUD 200 million and AUD 210 million, and we kind of are quite hopeful and think it's quite achievable for us to actually return to those levels. Of course, we want to do better than that, but only once we've proven that we can do better than the, than that, we'll update the market. And as I've said before, with Titanobel's earnings, that would be in addition to those historical levels of 200-210. So, Titanobel will actually be a further catalyst to positive earnings for the DNAP business.
Okay, and moving on to Brook Campbell-Crawford from Barrenjoey. His question is related to Moranbah. Are you considering de-bottlenecking opportunities for ammonia production or potentially sourcing ammonia from third parties to utilize the AN capacity at Moranbah?
Yeah, I think that's a, that's a absolute great question, and same question I've been asking of the team, over, you know, over the past couple of months. So what is the first problem that we need to resolve? The first problem is that Gibson Island closed, and that meant, that means that we have 20,000 tonnes of ammonia less available to actually feed into Moranbah to keep the plant full, at that 380 kta level per year. So we know that, you know, kind of we're quite comfortable that half of the 20,000 tonnes of ammonia, we have actually found a solution.
We have proved the capital, and that would just be to, you know, capital to ensure a better conversion efficiency of gas to ammonia, and, and that would be, you know, kind of the installation of that capital, and the go live would, would be associated with our turnaround in Financial Year 2025. So Financial Year 2024, unfortunately, will still, you know, kind of result in us dealing with that shortfall of 20 kta, but half of that would be addressed through the capital, program, which we call the loop purge gas program, which is just a gas efficiency program, and that would be a, be addressed in Financial Year 2025. So by Financial Year 2025, half of the 20 would be addressed.
We are currently looking for other opportunities, such as introducing waste mine gas, looking for further efficiency improvements in the plant, you know, through changing design and adding more, you know, kind of ways to improve gas conversion efficiency, and that hopefully will kind of close the gap for us soon thereafter to actually, you know, kind of put us exactly in the same position as we were before we decided to close Gibson Island. In terms of improvements beyond that level, let's say the historic 380 kta, there must be opportunities for us to look at that. You know, we have to look at waste mine gas as a solution.
We also have to look at, green ammonia as part of our decarbonization efforts going forward, and I know that we've got, you know, answers and processes for both, and looking at both to see how we can do it. Once we've got better clarity on those and how much capital it will cost, because we need to make some capital investments in that, we will come back to the market. But I can give you the comfort that we're thinking about this more broadly, longer term, but we have an immediate 20,000 tonnes of ammonia shortfall to address, and that's where all the effort goes into at this point in time.
A follow-up question to do with Project Agility. So there were costs of implementing that program in 2023. Do those costs drop away, and can you indicate what they were?
Absolutely, they do. You know, as what you can associate with projects like this, a lot of them actually have an impact in terms of restructuring. And ultimately, we have seen that the cost of that was roughly AUD 3 million that we incurred for Financial Year 2023. Those costs will fall away, and hence, the comment that I've made is we actually have positioned the business to see the full benefit of those lower cost structures coming to fore in Financial Year 2024. So that there was a once-off impact on the cost of around about AUD 3 million.
Okay, moving to John Purtell from Macquarie. Is there a potential timeframe on the outcome of the potential fert sale, one way or the other, and confidence re a fert process?
Well, ultimately, what we have said at this point in time is, we have finished a due diligence process. It was a very deep due diligence, a very quality due diligence. I'm quite comfortable with the work that both parties have put in to get us thus far. It's very difficult at this point in time to comment. You know, we know that, you know, at this stage that we are in a process that is quite commercially sensitive, and we cannot give anything away in terms of that. We need to make sure that we follow the best process in the interest of shareholders to get the best outcome for shareholders.
Whatever that outcome is, and the party that we're dealing with, you know, we will kind of then need to manage whatever comes after that. So ultimately, we're quite comfortable where we are, but there's more work to be done to bring that to a process of finalization.
Okay, you've answered this a little bit, Paul, but maybe a bit more clarity. Why are Northern Territory gas costs expected to be lower in FY 2024, and what fixes are being made at Phosphate Hill to improve reliability?
Two great questions. Well, the reason why, the gas cost is lower is because of mix. So we effectively see a greater component or contribution of, on-current contract, delivery of PWC, so it's honoring the contract to a much higher level than what we have seen for Financial Year 2023, which is quite encouraging, and again, underscores the contribution of Sunil, who has been tirelessly working with, Leigh and the team to ensure that we, you know, kind of see how much of the contract can be honored and will be honored by PWC, and they have actually been quite positive and responsive towards our request, to honor the contract.
So it's really that mix of contribution, and of course, it's also the cap mechanism on gas in Queensland that will also help us to prevent the gas costs going above a certain level. So it's about mix and honoring the current contract that kind of puts us in this position. The second question on reliability is, and I really wanna, you know, wanna express my deepest disappointment in where we are with this. You know, we have seen great success in terms of our manufacturing program, but on Phosphate Hill. I do feel comfortable that with Peter Weir and the team there, that there's not a lack of commitment and a lack of capability, so we've got the right people on the ground doing the right things.
But unfortunately, as part of the turnaround in Financial Year 2022, there were some vulnerabilities, which I can go into detail with when I maybe speak to you one-on-one, that ultimately emerged post the turnaround, that wasn't known at the time of the turnaround, or because of the size of the turnaround, we just couldn't attend to everything. Because, as you know, these turnarounds are sizey, and ultimately you can do only as much in the time and with the resources available. So we have analyzed why all of these reliability issues happened. I feel quite comfortable that there's three or four areas that we shared with the board, that we felt like we had vulnerabilities, either known at the time of the turnaround or soon thereafter, that we really need to address as a matter of urgency.
The task force has actually worked through those four areas, and in November, we will kind of complete the necessary work on that plant to address most of those vulnerabilities. There's only one remaining, which we believe we can actually manage, and that should actually effectively bring us back to a reliability level of producing, you know, 80,000 kta per annum. When I looked at the results, you know, over the past year, we produced around about 72,000 kta per month. We must actually produce 80,000 kta. So we have this gap of 8 kta per month that's unacceptable. It doesn't seem like a lot, but it's kind of 10% of your production that you don't achieve.
We do believe through addressing these three vulnerabilities that we have, we will be able to close the gap, and hopefully by December, when the plant is full up and running, we can actually kind of get to that 80,000 kta per month, which we want to kind of achieve, and that will allow us to get to that 810-840 level for this Financial Year and hopefully much higher in the year following.
Okay, and again, from John: What did U.S. Q& C volumes do during the year, and what's the outlook for FY 2024?
Yeah. It's a bit of a, you know, kind of the way that I think I ran the 400m at school, you know, you kind of when the shot goes off, you run your heart out, and then when you get into the home stretch, you feel a little bit tired, and the legs gets heavier, and it goes a little bit slower. So I will say the U.S. Q&C market was kind of something like that. It really started off with a bang. The first half, we kind of saw the kind of the growth rates being 7%, which was something that we did kind of grew accustomed to over the past two years. But the second half was actually a little bit more subdued.
It was 4%, but we shouldn't forget that it's GDP +1% still, so it's still growing above GDP, but definitely not at that level of 7%. We do anticipate financial 2024 to be around that 4%-5%. We hope it's gonna be 5%. We've got no reason to believe that it's not 5%. We're actually seeing from October's result, it's actually quite strong. It is in that 5% range, but I guess we need to kind of see how it plays out. But I think a more modest GDP +2%, which culminates into a 5% growth rate in the Q&C, is probably more where we think it will play out. If it's better than that, we'll be extremely happy. We don't see catalyst for that dropping below that level.
That market is strong and will continue to be strong with the infrastructure developments that, that we've seen. So it's gonna be probably in, in that level.
Okay. And a question from Neeraj Shah, from Goldman Sachs. A follow-up question on DNAP. Can you quantify what the earnings contribution was from Titanobel?
Yes, Titanobel for this Financial Year was around about $8 million net. So just remember, this would be the last year where we implement... And last, and next year, a little bit, in terms of, you know, the kind of, let's say, the full operationalization of Titanobel to kind of meet the Dyno standard. So there is some kind of operationalization of these costs still needed. We need some work on the ERP system to fully integrate that into the, to the Dyno system, some work on safety processes that we need to do, and some commercialization efforts to make sure that we kind of get to the full benefit.
So there's gonna be a little bit of cost still associated in the next Financial Year, but we still anticipate a year-on-year increase in terms of the earnings for Titanobel, far above, well, much higher above the double digits of earnings. I will say the positive note that I see in Titanobel is that our commercialization efforts, the sales from that entity, is really beating our expectations. We now enter the territory where we need to market into West Africa, and we see some positive signs on that, but we need to kind of deliver that in the next year. So the electronic detonators that we sell, kind of that business case that we anticipated, is really going well.
We also kind of are very positive about us, you know, putting our mark down in Africa, which was the other part of it, and Nigel and the team are doing great work in terms of that. So we're feeling quite upbeat about the Titanobel is going according to plan, and when we bring it to full value, we know that, you know, ultimately, the EBIT from that asset need to be much hi- much higher than double digits, you know, in terms of earnings. You know, so yep, let's see how it goes, but we, we quite, we're quite upbeat about our contributions of Titanobel in the years to come.
Okay, and moving across to North America, can you comment on AN pricing momentum in North America, given the more regular recontracting process?
Yes. Yeah, so, basically, I will say, in terms of the price dispensation of AN in North America, it's a much more competitive environment in North America. We do see that, where we find ourselves in terms of the 2.5 million ton AN market that we have in North America, that, you know, the amount of AN going into fertilizers probably is lesser now than what it's before, so more AN available in the industrial market where we compete. So probably not as, you know, robust as we have it in Australia from a pricing perspective, but I know Braden and the team has continued to stay course on keeping the pricing sharp.
I do anticipate that the thermal coal market becoming a little bit softer over time as that market starts to shrink will also probably put some downward pressure on on AN and AN and pricing as AN becomes more kind of long in the US than short. So ultimately, we do feel in the US probably, and the competitiveness of the market, that that market will be probably softer than what we see in Australia, where the market is actually quite strong and because of the kind of the balance or shortness of AN in the market.
And this might be our final question, coming from Scott Ryall at Rimor Equity Research. You have a change in chairman, an interim CEO, the structure of the company is unclear, and it appears that the focus is ongoing business sales and other structural issues. Why would an investor want to invest in IPL right now?
Well, first of all, if I'm an investor, I always ask myself: Do we have quality assets, and do we have a clear strategy? And absolutely we have. So let me start with the strategy. The strategy is very clear, in terms of setting up two leading businesses with great capability in terms of people and as well as great assets that has competitive advantages, meaning it has access to low-cost feedstock, it's close to the market, and it has, it has a sustainable story going forward. Now, as an investor, that should be appealing to any investor. I will also say that there are many strong catalysts to growth and value unlock for a business. And again, you know, if you do it responsibly as an investor, you also want to enter at the right time.
So I believe that, you know, over the past couple of months, I will definitely agree with you that there was a lot of noise, there was a lot of movement, but where we do find ourselves is a board very much aligned towards the acceleration and execution of the strategy. I can assure you, I may be the Interim CEO and I have an Interim CFO, but there's definitely not a lack of commitment. We share a very common passion with the executive team of bringing this business to its full potential and driving kind of the delivery on the strategy.
We've got great people in the organization, and I do believe, you know, if we can get all of our ducks in a row, you know, and I've got no reason to believe that we cannot do it, and we're already not on the path of doing it, that we can really bring and set this business, you know, alight in terms of its full potential. So yes, maybe if you kind of continuously looking in the mirror, you may be concerned. I can give you assurance that if I look forward, I see a great potential of this company and a great lot of value that we can bring. Also, our commitment to creating a better culture in the organization, which is quite important.
You know, we know culture eats strategy for breakfast, and there's a significant commitment between us and the board to improve the culture of the organization, to get people's head in the game, to make it more safer, more robust, as an organization. Judging by the results of the past, you know, six months and especially the past three months, we are on the right course. Our people's head in the game, you know, they feel energetic and passionate about what we do, and, you know, you need passion and conviction to also kind of drive you to the end.
So maybe this is a little bit, you know, motherhood and apple pie, but I believe, you know, if I want to invest in a company, we need strategy, we need competent management, we need a board that is able and capable to push this forward, and we need to kind of get through the stickiness of selling these assets and refocusing us beyond that. But we've got the plans, we've got the drive, and we've got the know-how to do it. So hopefully next year when we sit here, we will be in a much better position, and but all the catalysts are there, and I feel very positive about the future of this company.
Okay, and there is another question that's come through from Nathan Riley at UBS. Can you give us a little more detail on the potential Saudi plant investment opportunity, and are there any other global AN capacity investment opportunities?
Yeah, I think that's a great question, and again, it comes back to this passion that I just explained now, you know. I've seen nothing other than the team really wanting to look for these niche opportunities that can actually play to our strength as a business. And the Saudi AN investment would be exactly one of those. It is one of those where we believe we can get access to low-gas feedstock that will be converted into low-gas ammonia, that gives us low-cost ammonium nitrate, that gives us a competitive advantage if we take that and, you know, kind of place it in markets where we want to compete.
So having access to low-cost feedstock is our strategy, and that AN delivery through a vehicle such as what we have now agreed in the MOU with the Saudis is absolutely something that will kind of play to the company's strengths, going forward. So are there any other opportunities? I think the answer is absolutely yes. This is just a great opportunity because it's so well located. It's in an environment where it kind of makes sense. The Saudis, we know, are kind of great business partners, and it kind of will make significant sense for shareholders. But we will compare, you know, and look at other opportunities. We believe in LATAM, there may be some real opportunities for future AN facilities if they make sense, and obviously, they need to be of the right size in the right locations, in LATAM.
But we believe that there's a real opportunity there to consider further developments thereof. In certain markets like Australia, we don't think that, you know, that would be forthcoming. So it really is market and geography specific, but I do believe the Middle East as well as LATAM probably at this point in time offers the best opportunity for us just because of the location where the markets are and where the kind of the earnings potential of those assets are at the lowest possible risk of investment.
That's all for the Q&A. Thank you for, for all your interest, and we do apologize again for those technical issues, but I'll just hand back to Paul for closing comments.
Thank you very much, everybody on the line, and again, sorry for, you know, for the technical difficulties that you've experienced. But like I said, I wanna close this by saying is, there must be a lot to like because we've done a lot in the business, but there's a lot more to be done. We as an organization are very committed to deliver the best possible outcome for all our shareholders and stakeholders, and we want to leave ourselves with a much better and stronger business with a very strong earnings profile, and we do believe that, you know, the, you know, all the catalysts are there. We are highly committed to a high-performance culture. We've got the right people, we've got the right accountability sorted.
We know that, you know, we'll focus on cost, manufacturing, reliability, and customer growth through our unique and very robust technology offering, and we know that we will working quite well with this, with a renewed focus, and hopefully next year, the end of Financial Year 2024, we will be smiling because we have put the score on the board that we want to achieve. So thank you very much, and have a very safe and blessed day.