Orica Limited (ASX: ORI), which is Australia’s largest mining, technology, equipment, and service player, in the annual general meeting held on 19 December 2018 discussed its financial year 2018 summary and its performance. In the AGM, the chairman Mr. Malcolm Broomhead highlights that the company always tries to maintain a balance between the growth in investment and the main aim to provide a short-term return to shareholders of the company.
He also laid stress on the safety issues which the company follows towards its employees. FY2018, reports zero fatalities. He also highlighted that the company had taken initiatives for the long-term growth which is progressing.
The FY2018 results are not as per the expectations of the company due to fall in EBIT by 3%. The primary cause of this downfall was a sudden shutdown of the manufacturing plant in the first half of the financial year. There was another cost which the company had to bear was in the form of sourcing and freight cost at its Burrup plant. The company and its joint venture partner Yara were marketing its product into the Pilbara region. This plant produced ammonium nitrate of high-quality, but the problem of this plant was during the end of the commissioning process where the heat exchangers needed an immediate replacement.
After this, there were a lot of changes made in the company where the company invested a lot towards the project management. They also replaced certain board members who had technical and manufacturing expertise.
In the second half of the FY2018, there was an improvement in the manufacturing unit as a result of which there was an increase in the earnings of the company by 46%. It made the company to regain its position which the company once had in 2014. The company also won contracts and have also shown improvement in the macroeconomic environment. There was also an increase in the sale of ammonium nitrate by 5% where the maximum demand was from Australia and Indonesia. The FY2018 results also highlight an increase in the demand for the new products of the company. The application of the recent technology introduced by the company has increased the total sales by 30% as compared to the previous year. It indicates the company had put in a lot of effort to bring back its original position.
The company is going to introduce BlastIQ, after the completion of trials of BulkMaster7 delivery systems and wireless blasting system, WebGen. As the AGM proceeds further, the shareholders were made aware of the acquisition of GroundProbe which has expanded its digital capability, and its offering made to the customers. GroundProbe linked with the entire business of the company gave a positive earning. The company is now stepping ahead where it will now looking for alternative solutions to increase its returns for which the company has also entered into the agriculture market.
The company is very focused on maintaining the financial health of the company for which capital efficiency and cost management remains on priority. For the FY2019, Orica has plans to increase the earnings and further improve the second half results of FY2018. By the end of trading on 19 December 2018, the market price of the share was A$17.450 with the market capitalization of A$6.59 billion.
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