Orica takes a hit on CEO exit, poor outlook

Orica names a successor to CEO Alberto Calderon as it cites China blacklists while slashing its earnings outlook.

Orica chief executive Alberto Calderon is leaving after six years.

High-profile Orica boss Alberto Calderon will step down after six years in the top job at the explosives manufacturer, as the company’s shares were battered after it flagged a $125m first-half earnings hit.

Mr Calderon, formerly a top executive at mining giant BHP, announced his retirement from Orica on Friday, with the company saying he will be replaced by Sanjeev Gandhi, recruited last year as its group executive and president of Australia Pacific Asia operations.

Mr Calderon said he had been planning to step down in 2020, but the company’s succession plans had been interrupted by the coronavirus pandemic.

“It is now the right time for an orderly leadership transition. Sanjeev is a terrific leader, and I am sure will lead Orica to even greater heights,” he said.

Mr Calderon’s departure comes as Orica slashed its earnings outlook for the year, blaming trade tensions between Australia and China and COVID-19 ructions for denting demand for thermal coal, forcing it to slash supplies of ammonium nitrate to local miners as part of a $125m earnings hit.

The company’s shares were battered on the twin announcements, closing down $2.78 or 18.1 per cent to $12.56 on Friday.

China’s black-listing of Australian coal has showed no signs of easing, with Beijing’s move meaning producers have had to find new markets outside of the world’s biggest commodity consumer.

The coal ban plays a major part in cutting 60,000 tonnes of ammonium nitrate from Orica’s sales for the first half of its 2021 financial year — ending in March — compared with the prior year, or about 7 per cent of Orica’s monthly ammonium nitrate volumes for the Australia, Pacific and Asia regions.

Orica estimates it will reduce earnings before interest and tax by $70m-80m in the first half of the year.

The bulk of Australian mines depend on Orica to keep their production running through its supply of bulk explosives and detonator systems.

Mine closures in Columbia, social unrest in Peru and strikes in Chile have also hit the miner.

Orica chairman Malcolm Broomhead told The Weekdn Australian the impacts of social unrest and the coronavirus in the Americas, a key growth market for Orica, made up the bulk of the impact on its earnings.

“It’s probably about 60 per cent of it. Of the volume hit, it would be 40 per cent related to coal, and rest was in the other countries,” he said.

Orica will also incur a $20m-25m charge from the strengthening Australian dollar against the US dollar and other currencies and $15-20m in lower earnings from more arbitration costs on the Burrup plant in WA and SAP system stabilisation costs.

Under Mr Calderon’s leadership Orica has shifted its focus from its traditional manufacturing base into high tech offerings, snapping up a swathe of mining-focused technology companies along the way, such as Brisbane-based GroundProne, which now has contracts monitoring ground movements at some of the world’s biggest open cut mines.

Mr Calderon said he didn’t plan to take another senior executive role at a big listed company, saying he wanted to take a step back from the stress and long hours that came with being responsible for a major corporation. Be he said he had no plans to quit working completely, flagging a shift into a role at a private equity partnership.

“I love working and I don’t plan to retire,” he said.

“I’m looking forward to this private equity role where I still, I believe, can add value from what I’ve learned. I will be like an operating partner in private equity, which allows me to use my learnings in running companies, but without the nine to five and probably all the responsibilities.”

Mr Calderon has also helped lead the manufacturing industry’s fight over high Australian gas prices and, despite saying he was heartened by signs the federal government was serious about grappling with the problem, the outgoing Orica boss said the company was still to see any concrete improvement in pricing.

“We need tangible evidence. So far there’s a lot of good intentions many people — including Angus Taylor — in government are working hard. If we’ll see the results, we don’t know yet,” he said.