Earnings uplift from the core blasting business and growth in technology and Digital Solutions

09 May 2024

Earnings uplift from the core blasting business and growth in technology and Digital Solutions.

1HY24 Key Achievements

  • Statutory Net Profit After Tax (NPAT)(1) of $337.5 million (1H23: $122.6 million), including $158.4 million of profit from significant items(2) after tax
  • EBIT(3) of $353.7 million, up 10 per cent on the prior corresponding period (pcp)
  • Earnings increased in all segments versus the pcp attributable to strong customer demand, increased earnings from advanced technology offerings and continued commercial discipline
  • Underlying earnings per share(4) of 38.8 cents, up 2.8 cents from the pcp
  • Interim dividend of 19.0 cents per ordinary share, unfranked, representing a payout ratio(5) of 52 per cent
  • RONA(6) of 13.0 per cent, up from 12.4 per cent in 1H23
  • Completed strategic acquisitions of Terra Insights on 29 February and Cyanco on 30 April 2024

CEO Commentary

Summarising the continuing strong performance, Orica Managing Director and CEO Sanjeev Gandhi said:

Strategy and Performance

“We have delivered another strong performance for the first half of 2024 with a 10 per cent growth in underlying earnings from previous corresponding period. Our team remains committed to executing our strategy and has delivered improved performance and growth across all segments with an ongoing focus on quality of earnings.

“Our core blasting business continued to strengthen this half, supported by strong customer demand as well as increased earnings from high margin premium products and technology.

“Our Digital Solutions segment has also delivered solid growth, with strong demand across products and services.

“Return on net assets and operating cash flow continued to improve, reflecting strong business performance.

“The Kooragang Island ammonia plant six yearly turnaround has been completed safely and on budget, thanks to the hard work of our people.

“The strength and resilience of our people and our unmatched global asset and product portfolio enables us to adapt to and mitigate challenging macro-economic and geopolitical challenges.

Safety and Sustainability

“Safety and the prevention of harm is the number one priority at Orica. Regretfully, this half we reported an employee fatality as a result of a traffic accident on a public road in India where Orica’s vehicle was struck from behind by a non-Orica heavy haulage truck. A full and thorough investigation was undertaken, and the implementation of key learnings is in progress across our global operations.

“Pleasingly, there were no significant environmental incidents across our global operations and preventing loss of containment remains a key priority.

“We are also making good progress towards our climate targets as we work towards our long-term ambition to achieve net zero emissions by 2050.

“The instalment of tertiary abatement technology at our Yarwun plant is well progressed.

Terra Insights and Cyanco Update

“In this half, we have announced two highly strategic acquisitions of Terra Insights and Cyanco.

“The Terra Insights acquisition was completed on 29 February 2024. This acquisition has established Orica as the global leader in geotechnical and structural monitoring in mining and civil infrastructure with a unique portfolio of six industry-leading brands. The integration of Terra Insights into Orica Digital Solutions is on track with a key focus on delivering cross-selling opportunities.

“On 30 April 2024, we finalised the completion of our Cyanco acquisition. With the addition of Cyanco, Orica has now become the leading integrated global sodium cyanide producer and supplier, with access to the attractive and high margin North American gold market.

“I am excited about the growth that these acquisitions will bring to Orica. We are committed to successfully integrating these acquisitions and delivering value to shareholders”.

Dividend and Capital Management

The Board has declared an unfranked interim ordinary dividend of 19.0 cents per share, representing a payout ratio of 52 per cent. The dividend is payable to shareholders on 3 July 2024 and shareholders registered as at the close of business on 24 May 2024 will be eligible for the interim dividend.

Return on net operating assets (RONA), increased from 12.4 per cent in 1H23 to 13.0 per cent in 1H24. This was driven by our improved earnings performance as a result of executing our strategy, and strong market demand.

Gearing excluding lease liabilities(7) at 17.3 per cent is below the Group’s stated range of 30.0 to 40.0 per cent. Adjusting for the Cyanco acquisition purchase price of (A$973 million paid on 30 April 2024), the pro forma gearing at 31 March 2024 is 29.3 per cent(13).

FY24 Outlook

  • EBIT for FY2024 from underlying business before contributions from Terra Insights and Cyanco is expected to be higher than the prior year and slightly better than our expectation at FY2023 results due to:
    • Stronger first-half performance despite the heavy planned plant maintenance schedule
    • Strong demand for our products and services across the mining and civil value chains in 2H24 and continued strong adoption of our blasting and digital technology offerings
  • Terra Insights EBIT contribution after integration costs is expected to be minimal (acquisition completed 29 February 2024)
  • Cyanco EBITDA contribution is expected to be in the range of $40 million to $45 million (acquisition completed 30 April 2024)(i)
  • Depreciation and amortisation is expected to be $420 million to $430 million, including Terra Insights but excluding Cyanco(i)
  • Net finance costs are expected to be in the range of $170 million to $175 million including the financing for the acquisitions
  • Effective tax rate before individually significant items is expected to be around 30 per cent
  • Capital expenditure for the underlying business is expected to be slightly above the range of $410 million to $430 million. Additionally, $25 million of capital expenditure is expected for the acquisitions
  • Inflationary pressures, higher energy costs, supply chain disruptions and geopolitical risks will remain an ongoing challenge.

Market Briefing

Orica will provide a market briefing at 11:00am (AEST) today, 9 May 2024. A webcast of the briefing will be available at https://edge.media-server.com/mmc/p/686ow8ab

Documents

HY2024 Infographic

1. Equivalent to net profit/(loss) for the year attributable to shareholders of Orica limited, as disclosed in the Income Statement within the Appendix 4D – Half Year Report
2. Significant items as disclosed in Note 2(e) within the Appendix 4D – Half Year Report
3. Equivalent to Profit/(loss) before financing costs and income tax, as disclosed in Note 2(b) , Appendix 4D - Half Year Report. It excludes significant items
4. EPS excluding individually significant items as disclosed in Note 3 (ii) of Appendix 4D – Half Year Report.
5. Dividend payout ratio = Dividend amount / Underlying NPAT before individually significant items
6. Return on net operating assets = 12 month EBIT / Rolling 12 month Average Operating Net Assets where Operating Net Assets = Property, Plant & Equipment, Intangibles, Equity Accounted Investees and working capital excluding environmental provisions
7. Net debt / (net debt + total equity), where net debt excludes lease liabilities

(i) Total Australian income (includes sales, exempt dividends, interest income etc.) before all expenses (for example, interest, employee costs, depreciation)

Analysts Contact

Delphine Cassidy
Chief Communications Officer
Mobile +61 419 163 467

 

Media Contact

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Head of Communications
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