Orica (ORI) | SNAPSHOT
Profile: Orica (ORI) is a global explosives and commercial blasting systems company. Its products are typically used by mining companies in open cut and underground mining as well as in tunnelling, quarrying, construction and oil and gas markets. It also provides mining support services, related analytics and chemical products such as sodium cyanide, which can be used for gold extraction.
History: Jones, Scott and Co. was established in 1874 as a supplier of explosives to the Victorian gold fields. The company was bought by Nobel, which subsequently merged with Brunner Mond and Co, United Alkali Company and British Dyestuffs Corporation, forming Imperial Chemical Industries Plc (ICI Plc). In 1998, ICI Plc divested its Australian interests, with the divested entity becoming known as Orica. ORI acquired Minova in 2006. In the same year, ORI divested its 70% shareholding of Incitec Pivot (ASX: IPL). In 2010, ORI demerged DuluxGroup.
Earnings composition: In FY18, the Australia Pacific and Asia segment reported adjusted Earnings Before Interest and Tax (EBIT) of $382m (57%). The North America segment reported $186m (28%) of EBIT, while EMEA delivered $55m (8%), Latin America $43m (6%) and Auxiliaries $5m (1%). Minova reported a loss before interest and tax of $2m.
Most recent result – 1H19: Group EBIT increased 20% on the prior corresponding period (pcp) to $301m, driven by higher sales revenue which increased 12% to $2.8bn and reduced overheads. Both the Minova and Auxiliaries segments reported profits in 1H19 ($7m and $10m respectively) compared to losses in 1H19. EMEA EBIT increased 58% to $30m while APAC increased 4% to $174m. Group NPAT before significant items increased 35% on the pcp to $167m. A 22cps dividend was declared, up from 20cps in the pcp. ORI’s recognised write-downs and impairments in 1H19 related to assets in its Burrup plant as well as IT assets.
Company outlook: ORI expects improved revenue and EBIT in FY19 from higher demand and manufacturing improvements. Earnings are expected to be skewed to 2H19. EBIT growth is expected from all regions except LATAM. Burrup plant rectification works are expected be completed in 1H20, with lower utilisation from the plant in 2H19 expected to be mitigated by business improvement initiatives.
Important dates: FY19 results are scheduled to be announced on 1 November 2019. Books are scheduled to close on 13 November 2019 for the final dividend. The payment date is 6 December 2019. AGM is scheduled for 17 December 2019.
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