Corporates 1: Orica's Profit Hit

The explosives, paint and chemicals supplier Orica says its March 31 interim results will be adversely impacted by the continuing cost of cleaning up at its highly polluted site at Botany in Sydney.

The company warned yesterday that there will be a $63 million hit from the additional clean up work.

Orica said in the statement that it had put aside $45 million to clean up mercury contamination at the Botany Industrial Park.

The company also has allocated more money towards the repacking of hexachlorobenzene (HCB) waste stored at the Botany Industrial Park.

It said an environmental assessment had been completed on elevated concentrations of mercury at the Botany site.

"Accordingly, an environmental provision for $45 million ($31.5 million after tax) for remediation activities in respect of this contamination will be recognised as an individually material item in the financial statements for the half year ending 31 March, 2010," Orica said in a statement to the Australian Securities Exchange.

Orica said the matter had been disclosed previously as a contingent liability in the company’s financial statements.

The remediation activity is expected to be completed within the next 12 months.

Orica also said that, following a review of existing environmental provisions in light of cost changes, approval delays and other factors, it would increase environmental provisions relating to hexachlorobenzene (HCB) waste disposal at the Botany site by $18 million ($12.6 million after tax).

This would be recognised as a material item in Orica’s accounts for the half year ending March 31, 2010.

Orica also said in the statement that it would appeal against a Federal Court decision earlier this month that would raise its tax liability over the sale of the company’s pharmaceuticals business in 1998.

Orica confirmed that it would record a material item of $192 million after tax as a material item in its half year accounts in relation to the court decision.