Orica Implements Cost Reduction Program and Revises Full Year Forecast

24 October, 2001

Orica Limited today announced a cost reduction program as part of the company’s long-term strategy to improve the efficiency and performance of the company.

Orica Managing Director and Chief Executive, Malcolm Broomhead, said the strategy has been initiated to address the company’s unsatisfactory financial performance and the need to urgently address costs, improve cash flow and streamline the company.

As foreshadowed in previous company announcements, Orica is instituting the group-wide program to generate savings through rationalisation and operating efficiencies. The program will include changes at Orica’s Melbourne Head Office which will result in 280 people leaving the company as a result of redundancies.

These changes - combined with rationalisation across all operations and redundancies in Orica’s businesses – will result in a provision of $101 million before tax ($70 million after tax and minorities) which will be included as a significant item in Orica’s accounts for the financial year ended 30 September 2001.

In August the company had advised the Australian Stock Exchange that it anticipated earnings before significant items for the year ended 30 September 2001 of $60 million plus significant loss items totalling a loss of $185 million (after tax).

As a result of today’s announcement the anticipated earnings before significant items will remain as forecast at $60 million. The significant loss items will increase by $70 million to a loss of $255 million (after tax). The company therefore now anticipates a net loss after significant items of $195 million after tax and minority interests for its 2001 financial year.

The major benefits of the cost reductions should flow through in the second half of the 2002 financial year.

Mr Broomhead said Orica faced the need for a rapid change in efficiency, culture and strategy to reverse the company’s decline in performance. "It saddens me that it has been necessary for the roles of a large number of people to be made redundant. Many are long-term Orica employees and I acknowledge their service to the company.

"We will provide the entitlements, career advice and counselling necessary to sustain departing employees through this difficult period."

The start of the restructuring program was advised to staff in September 2001 following Mr Broomhead’s appointment as Managing Director and CEO. Orica chairman, Don Mercer, began a review of the Corporate Centre in August 2001 which Mr Broomhead extended to cover all businesses.