Summary
- Orica Limited (ASX:ORI) has reported results for FY20, registering 31 per cent and 9 per cent dip in statutory net profit after tax and underlying EBIT, respectively.
- Orica Managing Director Alberto Calderon stated that FY20 demonstrated the resilience of the operating and financial performance amid the pandemic.
- The successful acquisition of Exsa in FY20 brought diversification into both copper and gold while reducing exposure to coal.
- Total dividend per share for the year stood at 33.0 cents per share with a payout ratio of 45 per cent
- The healthy balance sheet delivers enough headroom against debt covenants.
- EBIT for 1H21 is expected to be lower than the PCP. However, a significant improvement is expected in 2H21, with overall EBIT growth for FY21.
Commercial explosives and innovative blasting systems provider Orica Limited (ASX:ORI) has released its FY20 results. Despite a considerable dip in net profit, the company managed to register a strong performance amid COVID-19 blues.
The company reported a statutory net profit after tax of AUD 168 million for the 12-month period ended 30 September 2020, down by 31 per cent on the PCP. Underlying EBIT stood at AUD 605 million, representing a decline of 9 per cent year-on-year. Furthermore, underlying earnings per share went down by 23 per cent to 75.7 cents per share.
FY20 Highlights
- FY20 witnessed the successful acquisition of Exsa, bringing greater diversification into both copper and gold while lowering coal exposure. The Exsa equity capital over the raising of AUD 126 million has bolstered Orica’s liquidity position.
- The Burrup plant has been operational since May 2020, producing high-quality ammonium nitrate. Continuous manufacturing remains efficient.
- The unfranked final dividend stood at 16.5 cents per share, scheduled to be paid on 15 January 2021. Total dividend per share for the year was noted at 33.0 cents per share with a payout ratio of 45 per cent.
- The final phase of the SAP project was rolled out in July 2020.
- Net operating cash flows stood at AUD 277 million and cash conversion was noted at 74.4 per cent.
- The healthy balance sheet gives enough headroom against debt covenants.
- The 1H results remained robust, up by 4 per cent. However, 2H was impacted by the pandemic with AN volume down 207k tonnes on PCP.
- Cost initiatives have been implemented to mitigate the negative impact of the pandemic.
Outlook
Given the ongoing global uncertainty, EBIT for 1H21 is expected to be lower than the PCP. However, the Company expects a significant improvement in 2H21, with overall EBIT growth for FY21.
The focus will be on achieving initial benefits from strategic priorities and established, solid growth platform. Capital expenditure in FY21 is anticipated between AUD 380 million and AUD 400 million (excluding Burrup) with a continued focus on growth capital and plant reliability.
While the pandemic-induced challenges highlight that the upcoming period cannot be predicted with any great certainty, the impacts are temporary. With the majority of customers returning to pre-COVID activity, ORI is optimistic about the coming period, Mr Calderon stated.
Stock Performance: On 20 November 2020, at AEDT 11:57 AM, ORI traded at AUD 16.200, down by 4.538 per cent.
