Orica sinks to first-half loss on one-off charges

Shares in explosives supplier Orica sank after an interim $229m loss blamed on one-off charges and operational setbacks.

Orica managing director Alberto Calderon. Pic: Colin Murty

Shares in Orica, the biggest supplier of explosives to the mining industry, fell more than 6 per cent in early trade after the company booked a first half loss due to one off charges and operational setbacks.

The company recorded a net loss of $229.3 million for the six months through March, in line with the company’s expectations. That compared to a profit of $195.2 million in the same period a year earlier.

The result included $353 million in one-time charges, including a $204 million goodwill writedown against its Minova business.

Despite the first-half loss, chief executive Alberto Calderon told investors that the company expects strong demand to lead to a second-half improvement.

“We continue to see clear signs of continued recovery in the markets we service and as a result a lift in demand for our products,” he said.

“We started to see some of this come through in March and April.

“I am confident that this recovery will continue for fiscal year 2018 and into fiscal year 2019.”

Stripping out significant items, Orica said it made a profit of $123.6 million, down 37 per cent on year.

“We are disappointed that the underlying financial performance in the first half was impacted by operational issues and we are working hard to increase manufacturing reliability, operational discipline and excellence,” said Mr Calderon.

But Mr Calderon said there was a “trend of underlying growth in demand,” particularly in Australia and Indonesia. Prices have also stabilised, he said.

“We are on track to deliver full year sales volumes at the upper end of guidance, and improved operational performance across all regions will support a stronger performance in the second half of the financial year,” said Mr Calderon.

Orica said it would pay an interim dividend of 20 cents per share — a payout ratio of 61 per cent. The company aims to pay out 40-70 per cent of underlying earnings annually.

With Dow Jones Newswires