A top-performing stock for the quarter was Incitec Pivot (ASX:ISL), an Australian manufacturer of mining explosives, fertilizers and industrial chemicals. Incitec Pivot’s share price reacted favorably following the company’s fiscal year earnings report that was released in early November. Overall, these results were in line with our estimates and represent what we believe is solid performance in the face of significant macro headwinds across Incitec's businesses. We met with management in December, and found that their efforts to reduce costs during 2016 were substantive and helped counter tough market conditions that significantly affected their earnings, such as steep price declines for fertilizers. Overall, the company expects its markets to remain challenging in 2017. However, management is on track to deliver additional cost savings to help combat this, and certain markets seem to be improving, including the mining explosives and urea markets. In addition, the company is now in position to harvest the benefits of a period of significant capital investment. Even with the recent share price advance, we believe Incitec Pivot is trading at a substantial discount to the company’s true worth.
From David Herro (Trades, Portfolio)'s Oakmark International Small Cap Fund fourth quarter 2016 commentary.
