News & Media
Improved operating performance and manufacturing reliability delivers stronger first half result
09 May 2019
Melbourne: Orica (ASX: ORI) today announced a Statutory Net Profit After Tax (NPAT) for the six months to 31 March 2019 of $33 million. NPAT of $167 million, before individually significant items, was up 35% on the prior corresponding period.
Orica Managing Director Alberto Calderon said: “This result demonstrates growing momentum in Orica’s business driven by stronger operating leverage. Improved operational performance across all regions and businesses, sustainable overhead reductions and improved manufacturing performance, each contributed to significant Earnings Before Interest and Tax (EBIT) uplift in this half.
“In the first half of this year we have delivered higher Ammonium Nitrate (AN) volumes (+3%) and higher sales revenue (+12%) driving 20% EBIT growth.”
“Our performance has been supported by contract wins and growing demand from existing customers in our key Australian and Latin American markets, improved performance in our manufacturing operations and fewer unplanned maintenance shutdowns. The commercial environment for Orica’s business is also improving as prices firm and the market moves towards supply / demand balance.”
Orica continues to make good progress with the commercialisation of innovative blasting solutions that improve mine productivity and lower customer operating costs. The performance of the GroundProbe business exceeds its investment case and is expected to meet its 15% Return on Net Assets target earlier than anticipated.
The rectification works at the Burrup Technical Ammonium Nitrate (TAN) plant are progressing. The statutory result announced today also reflects non-cash adjustments of defective equipment, which is being replaced at the plant, as announced on 29 April 2019.
The Burrup plant remains an important part of Orica’s domestic supply strategy and holds long term commercial and strategic value to the company. It is expected the plant will be essentially loaded in FY20.
Individually significant items of $191 million ($134 million after tax) for the non-cash write-down of defective Burrup assets and the impairment of IT assets has been recognised in the period.
Capital Management and Dividends
Group gearing at 38.1% provides for a strong balance sheet and the company retains strong liquidity.
The Board has declared an unfranked interim ordinary dividend of 22.0 cents per share payable on 1 July 2019. The dividend represents a payout ratio of 50%. The Board anticipates the full year dividend will be partially franked.
Commenting on the full year outlook Mr Calderon said: “The outlook for the full year result remains unchanged from our prior guidance in November 2018 with our earnings weighted approximately 45/55 across the halves. Lower utilisation from the Burrup plant in the second half is expected to be mitigated by accelerated business improvement initiatives.
“Going forward we continue to expect stronger EBIT in the second half of 2019 supported by AN volume growth and firm pricing, further improvement in operating performance and efficiency as well as ongoing growth in Orica’s technology and advanced services offerings.”
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