AU Morning Wrap: ASX Drops, Incitec Dives on Disappointing Profit

Major stocks indexes fell on Tuesday despite support from growth stocks. Shares of companies in most industries traded lower with debt-ceiling negotiations remaining at a standstill.

Fertiliser maker Incitec Pivot was the biggest laggard, down 5.3 per cent as its net profit in the first half of fiscal 2023 took a hit on lower commodity prices and higher gas costs.

Shares in global malt supplier United Malt bounced 0.7 per cent despite swinging to a net loss of $14 million and scrapping an interim dividend.

Retailer Best & Less stock skidded 3.6 per cent after it slashed net profit guidance to between $10 million and $12 million for the second half of the year, from $18 million and $20 million previously expected.

The major banks and mining companies including those operating in gold and lithium fell.

The chance of a post-budget interest rate rise is rising and the Reserve Bank of Australia could lift the cash rate as soon as next month if Wednesday's wages figures exceed expectations, amid fears that weak productivity could embed high inflation.

Money markets ascribe a 58 per cent chance of an interest rate increase by August, compared to 34 per cent last Friday and before the release of the minutes of the RBA's May 2 board meeting on Tuesday. However, markets are pricing in just a 12 per cent chance of a move higher in June.

Incitec expects a positive earnings skew in the second half for its explosives businesses. Favourable agricultural conditions are expected in eastern Australia for the remainder of the financial year, and fertiliser earnings are forecast to rise in the second half.

The company kept its interim dividend at 10¢ a share, franked at 60 per cent.

But the company lowered net profit guidance to between $10 million and $12 million in the second half of the year, down from a guidance of $18 million and $20 million.

Revenue increased by 16 per cent to $757 million due to improved contract pricing and higher barley prices.

The company said its business had returned to year-on-year growth as it completes cycling comparisons against COVID-impacted periods, with trading in the past four weeks up 10 per cent versus the previous period.

Temple & Webster has bought back $4.1 million of shares so far out of an up to $30 million previously announced.

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