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Orica flags $400m first-half earnings hit

Prashant Mehra  |  01 Mar 2018Text size  Decrease  Increase  |  
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SYDNEY - [AAP] Explosives and fertiliser maker Orica (ASX: ORI) says it expects operational issues and writedowns to cut its first-half earnings before interest and tax by nearly $400 million.

Meanwhile, it has flagged a further streamlining of its businesses, including job losses, to deliver an incremental $30 million per annum from FY19, but has given no details.

Orica says its Minova ground support solutions business has continued to underperform despite a change in management and while the business is under review, it anticipates it will take a non-cash impairment and increase provisions for environmental commitments totalling $300 million.

The company also expects to write down the value of deferred tax assets and deferred interest in the US by $55 million due to the recent reduction in the US corporate tax rate.

In addition, unplanned maintenance shutdowns at its Yarwun plant in Queensland and Kooragang Island plant in NSW will reduce earnings by about $17 million.

It will write off around a further $15 million due to the problems at Minova, the impact of extreme weather on mine operations in the US and challenges in the cyanide market.

Plus, it will record a one-off impact of $19 million for the full financial year due to construction quality issues at its Burrup ammonium nitrate plant in WA, with most of it weighted in the first-half accounts.

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Orica, the world's biggest supplier of commercial explosives, has been looking to benefit from the partial recovery in prices of key commodities such as iron ore, oil and coal.

Chief executive Alberto Calderon told shareholders at the company's annual general meeting in December that 2017/18 volumes of ammonium nitrate shipped would be at the upper end of previous forecasts.

Orica on Thursday reaffirmed that guidance and said the earnings performance will be skewed to the second half of FY18, which is expected to see incremental earnings of around $60 million.

Orica is due to report first-half earnings on May 7.

 

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is a freelance journalist.

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© 2021 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

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