Supplier of explosives products and services Dyno Nobel (ASX: DNL) will report fiscal 2025 full-year results on Nov. 10, 2025. Management hasn’t updated guidance since the May commentary on the fiscal half-year result. That called for the second half to contribute around two-thirds of earnings.

Why it matters: We forecast a 5% increase in underlying fiscal 2025 EBITDA to $911 million, with the fiscal second half to contribute 66%. First-half earnings declined across all segments, due to maintenance and reduced customer activity due to rainfall on Australia’s east coast.

  • Explosives peer Orica reported a strong finish to its financial year with positive momentum continuing from the first half. We expect strength for Dyno Nobel too, though with even better second-half improvement, given the fertilizers business is likely to gain by around 90% on a poor first half.
  • We also reduce our forecast for unallocated costs in the midterm. This doesn’t affect near-term earnings, but we think we were too hawkish given management’s cost focus.

The bottom line: Our fair value estimate for no-moat Dyno Nobel increases 8% to $3.25. Key is the lower assumed unallocated costs. Transformation program benefits are on track. The time value of money and value accretion via share buybacks are additional, though lesser contributors.

  • Dyno Nobel shares are up around 40% from April 2024 lows, and at around AUD 3.00 are close to fairly valued. With fertilizers now largely sold off, our fair value credits a five-year EBITDA compound annual growth rate of 1.8% to AUD 950 million by fiscal 2029, still including Phosphate Hill, which is yet to be sold.
  • Our midcycle EBITDA margin assumption is 26%, up from 16% in fiscal 2024, though the latter still included fertilizers. Forecast improvement comes via uptake of technology-based solutions, and as transformation program benefits accrue.

A stronger fiscal second half beckons

Dyno Nobel (nee Incitec Pivot) aims to expand its business around its strong global market share in explosives. This provides an increasingly stable earnings stream relative to previously more volatile earnings from its now mostly exited fertilizer business. Dyno Nobel was a material player in the Australian domestic fertilizer market, but largely sold down this position in 2025 to focus on explosives. Competitive advantages include a duopoly Australian explosives business and global explosives operations.

Explosives earnings are leveraged to mining volumes as much as price and should benefit from long-term global growth in demand for minerals and metals. Additionally, mining strip ratios are expected to increase over time, with more explosives required to mine the same amount of ore. Given these dynamics, we expect demand for ammonium nitrate to continue growing. However, growth is likely to be uneven and subject to cyclical changes in demand for commodities.

Significant increases in capacity in the past led to near-term oversupply of ammonium nitrate on the east and west coasts of Australia. Dyno Nobel is consequently focused on ensuring all new projects meet strict financial criteria. Dyno Nobel’s explosives business is strategically short ammonium nitrate production capacity in a long-capacity market. So we don’t think margins will be overly hurt by the oversupply. We think this sensible, with its own plants sold out and consequently running at high efficiency. A superior product offering is essential to facilitate this strategy, with demand supported by flexible third-party agreements that are footprint-logical. Expansion at Moranbah in the east would only be considered after markets come back into balance.

Bulls say

  • Investors enjoy bumper dividends at peak cycle times.
  • Continued growth of the explosives business will reduce earnings volatility.
  • Over the longer term, explosives earnings are favorably leveraged to mining volumes rather than prices, and mine strip ratios are expected to increase over time.

Bears say

  • Capital allocation decisions have been questionable, including a selldown of fertilizers at a low point in earnings for the segment.
  • Dividends have often been unfranked.

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