As it warned in early March explosives and mining services group, Orica slumped to a weaker-than-expected $229.3 million half year loss after suffering several bouts of unplanned maintenance and reporting $353 million worth of impairments and provisions.
The company has told the market in early March that it would be taking more than $300 millions of exceptional items and impairments in its half year results.
And it did.
And the shares took a hit – down more than 6% on the day (to $19) after rising by around 12% since the guidance warning in early March. The largest impairment was the $203.6 million written off the value of Orica’s Minova subsidiary, which provides earth-control, adhesive and support solutions to the tunnelling and mining industries.
Minova lost $4.3 million in the six months ended March 31 and Orica said it was expected to continue underperforming for the rest of 2018. Exceptional items were also recorded in relation to US corporate tax cut and an environmental provision at Botany in Sydney of more than $114 million (nil previously). That relates to polluted ground at its old chemicals plant.
Excluding the one off items Orica’s half-year result was poorer than the 2017 interim result – the underlying profit of $123.6 million was 36% below the prior comparable result. Market forecasts has were for $147 million underlying half-year profit.
The loss saw directors trim the interim dividend by nearly 15% to 20 cents a share from 23.5 cents previously.
Unplanned maintenance at three major Australian operations – Yarwun, Kooragang Island and the Burrup ammonium nitrate facility in WA – added to the loss, as forecast in early March.
CEO, Alberto Calderon said the company was seeing solid growth in its Australian and Indonesian markets, but the result was disappointing regardless.
“We are disappointed that the underlying financial performance in the first half was impacted by operational issues and we are working hard to increase manufacturing reliability, operational discipline and excellence,” he said in yesterday’s earnings statement.
Mr Calderon said he expects a stronger half over the next six months, and with trend flowing ito 2019 calendar year.
Revenue rose 3.9% $2.53 billion. But that gain in revenue was largely offset by a 14.7% rise in raw material and inventory expenses, with higher oil prices lifting the cost of gas and ammonia.
