Orica halves final divided as profit drops 31%

Explosives major Orica has halved its final dividend after statutory earnings fell 31 per cent on the back of the coronavirus crisis.

Orica chief executive Alberto Calderon.

Explosives major Orica has halved its final dividend to 16.5c a share, as the company’s underlying earnings fell 20 per cent on the back of the coronavirus crisis.

Orica booked a statutory net profit of $168m for the year ending September 30, down 31 per cent on the previous fiscal year, with underlying after-tax earnings of $299.3m, down 20 per cent.

But earnings before interest and tax fell only 9 per cent for the year, to $604.5m, as the bulk of Orica’s Australian mining clients worked unaffected through the coronavirus crisis.

The results are in line with revised earnings guidance issued by the company in October, when it flagged full year EBIT of about $600m.

The final dividend of 16.5c cents per share, brings its full year dividend payout to 33c cents per share. It paid a 33c final dividend in 2019, for total a dividend of 55c that year.

Orica chief Executive Alberto Calderon warned the company still faced a bumpy ride over the short term, saying earnings for the current fiscal year were likely to be weighted towards the second half, as the company waited for key customers outside of Australia to return to normal operations.

“While the COVID situation means the year ahead cannot be predicted with any great certainty, the impacts are temporary. With most of our customers operations returning to pre-COVID activity, we have cautious optimism about the year ahead. With continued momentum, we expect to deliver a significant increase in EBITDA and a return to EBIT growth in the year ahead,” he said.

Orica said earnings for the first half of the current year were likely to be lower than the equivalent period in 2020, but followed by a “substantial improvement” in the second half.

And, in a positive sign for the long-suffering co-owner, Orica said it expected its once-troubled technical ammonia plant in the Pilbara in WA to deliver its first profit since construction began in 2012.

Commercial production finally began at the plant in May, after years of trouble commissioning the operation, and Orica said it now expected the manufacturing site to deliver annual earnings of about $25m as it hit full production levels.

Orica also flagged stronger action on its carbon emissions, days after being added to the “focus list” of climate activist investor group Climate Action 100.

Orica would cut scope 1 and 2 emissions by at least 40 per cent from 2019 levels by the end of the decade, Mr Calderon said.

Orica shares closed Thursday at $16.97.