In assessing performance for 2018, the company has made progress toward our longer-term goals, but short-term financial performance in 2018 did not meet our aspirations.
The business returned to revenue growth after some years of cyclical decline, reflecting both improved market demand and new customer contracts. Despite a strong improvement in earnings in the second half of the year, this was not sufficient to offset challenges experienced in the first half, resulting in a decline in earnings. Statutory net profit after tax was a loss of $48 million, including individually significant items of $372 million. The Board believes the improved performance in the second half of the year is more indicative of the company’s underlying health and trajectory.
The balance sheet has absorbed the acquisition of GroundProbe during the year while also funding capital expenditure to support volume growth.
The Board’s approach to capital management is driven by a commitment to maintaining an investment grade credit rating, preserving flexibility for potential investments and being able to respond to changes in the operating environment.
Consistent with this approach, the Board declared a final dividend of 31.5 cents per share, bringing the total dividend to 51.5 cents per share, in line with the prior year. This reflects a payout ratio of 60% of underlying earnings.
The Board recognises the important role culture plays in delivering the company’s strategy and meeting community expectations. Board members actively monitor feedback from a variety of stakeholder groups, visit operating sites around the world, and have observed first-hand the commitment of employees to our values, our stakeholders, and to achieving Orica’s goals.
The Board has been further strengthened with the appointment of Denise Gibson. Denise is a seasoned business leader with a strong track record in the technology sector and brings valuable insight to the commercialisation of Orica’s technology portfolio and broader operations. Denise will stand for shareholder election at the 2018 annual general meeting.
Priorities and Outlook
As the resources industry explores new frontiers in automation and digitisation, we are confident the commercialisation of our new technologies and expertise will further consolidate our industry leading position and drive value well into the future.
Orica’s priorities for the coming year centre around building on our safety performance, lifting returns from our global asset base and delivering against the rising demand from our customers. In the Pilbara region in Australia, returns in the medium term will improve as capacity at the Burrup Technical Ammonium Nitrate plant comes on line and produces reliably.
On behalf of the Board, I thank our shareholders for your continued support and our management team and employees for their contribution.