Orica Limited’s Shares Spiked Up On ASX After Announcing FY18 Results

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Orica Ltd (ASX: ORI), Australia’s largest mining, equipment, technology, and services player, stock rose 6.426% on November 02, 2018 after the company for FY 18 has reported 7% growth in the sales revenue. That is despite the 16% fall in the underlying profit fell by 16 percent to A$324.2 million ($233.55 million), on the back of unplanned maintenance shutdowns as well as operational issues at the Burrup plant for the FY 18.

The revenue grew due to an improved market demand, new contract wins and an increase in higher value-add product sales. Total ammonium nitrate volumes increased by 5% year-on-year, due to higher demand in Indonesia and Australia. However, the volume growth was offset by unfavourable contract pricing. The impact of contract pricing for the FY 18 was lower than previously expected due to the deferral of some contract re-negotiations to the 2019 financial year. Earnings before interest, tax, depreciation, and amortization were down 1% to $885 million. The earnings before interest and taxes were further affected due to unplanned maintenance shutdowns at Yarwun and Kooragang Island operations in Australia. While earnings in the first half were disappointing, the company posted earnings before interest and tax growth of 46% in the second half.  

Further, Burrup technical ammonium nitrate plant, which is the joint venture in Western Australia between Orica and Norwegian partner Yara International, was expected to be operational by the end of the FY2018, with the replacement of some key components expected to delay production until the first half of FY20.

Moreover, ORI has reduced the debt considerably in the second half to bring gearing to 35.7% at year-end, which is well within the company’s targeted range of 35% to 45%. This represents a three-percentage point rise on the prior year, after the acquisition of GroundProbe, the impairment of Minova and an increase in environmental provisions. The company has declared a final dividend of 31.5 Australian cents per share, up from the 28 cents per share a year earlier. For FY 19, ORI expects to post improved earnings due to increase in each of the regional businesses, with the exception of Latin America. For FY 19, Global AN product volume is expected to be higher by approximately 3%. In 2019, the company will incur approximately $25 million negative impacts from previously disclosed negative FY 18 deferred contract renewals. FY 19 CapEx is expected to be approximately $350 million. ORI is looking for new ways to increase the returns on the asset base and expects increased utilization rates at the manufacturing operations for the improvement of the financial performance in the coming year and beyond. The company continues to prioritize capital efficiency and cost management.

Meanwhile ORI stock has fallen 5.29% (source: ASX) in three months as on November 1st, 2018.

In the last six months, the share price of ORI decreased by 15.74 percent as on 1 November 2018. ORI’s shares traded at $17.720 with a market capitalization of circa $6.31 billion as on 2 November 2018 (AEST 4:00 PM).


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