By Jared Lynch
The world's biggest explosives maker, Orica, has posted a 33 per cent plunge in net profit, citing a "deterioration" of the global mining industry.
Net profit for the six months ended March 31 fell to $149 million from $222 million in the year-earlier period. Revenue, meanwhile, plunged 22 per cent to $2.6 billion.
Orica chief executive Alberto Calderon.Credit: Carla Gottgens
The hit to Orica's bottom line, included a "$41 million expense" in relation to its settlement with the Australian Taxation Office. The Federal Court found last December the company had avoided tax by using "round robin" financing arrangement it put in place a decade ago to boost its profit and ward off takeover bids.
Excluding this expense, net profit fell 10 per cent to $190 million.
Chief executive Alberto Calderon said the result was "credible" and the company had taken "decisive" action in a challenging market.
"While conditions deteriorated markedly throughout January and February 2016, with substantial commodity price volatility impacting mining industry volumes and flowing through to Orica's volumes for those months, we delivered a credible result," Mr Calderon said, adding the decrease in earnings before interest and tax was "contained to 4 per cent".
"Our continued focus on initiatives to fundamentally improve Orica's customer focus, business rigour and financial management delivered tangible results."
He said these results included Orica's business improvement program delivering $52 million in net benefits for the period.
Morgans analyst Belinda Moore, who expected a 20 per cent drop in net profit to $177.3 million, said earnings weakness reflected challenging conditions in the global explosives industry.
Orica's second-biggest market, the US, had been rocked by a sharp drop in coal production, which stemmed from a mild winter and the closure of coal-fired power stations in favour of cheaper gas generators, Ms Moore said in a note to investors.
"We continue to believe that ORI's guidance for EBIT improvement in FY16 is at risk given challenging end markets," she said.
Orica will pay an interim dividend of 20.5¢ cents a share, compared with the 40¢ payout in the year-earlier period.