Writedowns and difficult market conditions saw Orica turn in a loss for the year to September but directors see the solid rebound in the second half continuing into the current 2021-22 year and helping to boost earnings.
The explosives and fertilisers company reported a net loss of $173.8 million the September year, compared with a profit of $82.3 million in 2019-20.
Statutory earnings were hit by the impact of $382.2 million in significant items, including impairment charges against the joint venture company that operates the Burrup plant in WA and against goodwill in its emerging markets segment where challenging market conditions are making for a rough time and outlook at the moment.
Stripping out those charges Orica said its net profit totalled $208.4 million, down 30% from a year earlier while underlying EBIT of $427 million, was also down 30% on the prior corresponding period
Despite the write-downs and losses the board declared a unfranked final dividend of 16.5 cents a share.
That took the full year payout to 24 cents a share, down from the 33 cents a share in 2019-20. The company said the lower payout was within its 50% payout ratio limit.
“Orica’s 2021 full year results reflect a challenging year, with earnings from global operations impacted by adverse market factors including unfavourable foreign exchange movements, disrupted thermal-coal trade flows due to trade tensions with China, increased sea freight costs, and rising input costs,” according to the company’s release.
CEO Sanjeev Gandi said in Thursday’s release that “Subject to market conditions, the strong momentum from the second half of the current financial year is expected to continue into the 2022 financial year.”
“Earnings in 2022 are expected to improve from increased adoption of our advanced technology offerings, volume growth, supply chain initiatives and sustainable overhead cost reductions.”
“Meanwhile, our focus on pricing discipline will continue to play a key role in supporting the strategy rollout and mitigating the impacts of rising input costs.”
“We expect steady commodity growth in 2022 which will drive stabilised demand for explosives-related products and services, particularly in copper, gold and quarry and construction markets.
“Earnings in 2022 are expected to improve from increased adoption of our advanced technology offerings, volume growth, supply chain initiatives and sustainable overhead cost reductions.
“Meanwhile, our focus on pricing discipline will continue to play a key role in supporting the strategy rollout and mitigating the impacts of rising input costs,” he added.
Investors ended up marking the shares down 3.65% on Thursday to a close of $14.72.
