News & Media
Earnings down 3% with strong second half mitigating first half weakness
02 Nov 2018
Melbourne: Orica (ASX: ORI) has reported a statutory net loss after tax for 2018 of $48 million. Excluding individually significant items, net profit after tax was $324 million, down 16% on the prior year. Earnings before interest and tax were $618 million, down 3% on the prior year.
Orica CEO, Alberto Calderon, said, “We have returned the business to revenue growth, reflecting improved market demand, new contract wins and an increase in higher value-add product sales. While earnings in the first half were clearly disappointing, we responded quickly to the issues within our control to lift earnings before interest and tax by 46% in the second half. The temporary technical issues with the Burrup ammonium nitrate plant have been resolved and permanent repairs are expected to make the plant fully available for use in the first half of our 2020 financial year.
“Growth in demand for our technology-based offerings has continued, with revenue growth from new technologies as a proportion of total revenues up by more than 30% in 2018. While this still represents a modest proportion of sales, our new technologies have been an important element in winning new contracts. Improved customer satisfaction rates and a lift in market share in key regions also underlines progress toward our longer-term transformation. The acquisition of GroundProbe during the year has significantly expanded our digital capability and customer offering and contributed positively to earnings”.
Capital Management and Dividends
Debt reduced considerably in the second half to bring gearing to 35.7% at year end, well within our targeted range of 35% to 45%. This represents a three percentage point increase on the prior year, following the acquisition of GroundProbe, the impairment of Minova and an increase in environmental provisions.
The Board has declared a final ordinary dividend of 31.5 cents per share, unfranked. The dividend represents a payout ratio of 60% and brings the total dividend for the financial year to 51.5 cents per share. The final dividend is payable on 7 December 2018 and shareholders registered as at the close of business on 13 November 2018 will be eligible for the dividend.
Mr Calderon expressed his confidence in the outlook for the coming year, saying, “We are well placed to deliver improved earnings in 2019.
“Increased demand is expected to translate to earnings growth in each of our regional businesses, with the exception of Latin America.
“We are finding new ways to lift returns on our asset base and expect increased utilisation rates at our manufacturing operations to improve financial performance in the coming year and beyond. Capital efficiency and cost management will continue to be prioritised.
“Customer adoption of new technologies and conversion to more modern, less commoditised products and services is expected to continue, supporting our market share and margins“.
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