Orica Confirms Commitment to Increased Efficiency

5th November, 2001

Orica today released its full year results for 2001 and announced the full extent of its group wide efficiency program.

Full Year Results

For the year ended 30 September 2001 the company recorded a loss of $192.7 million after tax, minority interests and significant items.

Prior to significant items Orica recorded an operating profit of $62.3 million after tax. This result is consistent with the forecasts provided to the Australian Stock Exchange in August and October 2001.

In the 2000 financial year Orica reported profit after tax and significant (abnormal) items of $113.7 million and a full year profit after tax and before abnormal items of $147 million.

Directors declared a fully franked final dividend of 8 cents per share payable on 17 December 2001. The total dividend for the financial year ended 30 September 2001 is 16 cents per share.

During 2001 significant items of $255 million after tax and minority interests were incurred including:

• a provision for restructuring and redundancy costs of $78.7 million
• a write down in the carrying value of the North American explosives business, the Australian Vinyls business and other minor investments totalling $198.2 million
• negative impact of plant closures and industrial disputes at Qenos $12.8 million
• settlement of Zeneca Achieve Claim in Crop Care business $5.8 million
• receipt of a $40.5 million payment from Syngenta following termination of a product distribution agreement with Crop Care.

Announcing the results, recently appointed Managing Director and Chief Executive Officer Malcolm Broomhead said "The full year results for 2001 are totally unacceptable and reinforce the need for urgent and substantial action to improve efficiencies across the company."

Group Wide Efficiency Program

The company’s efficiency program will involve a reduction of 800 positions and will result in cost savings during the 2002 financial year of $70 million after tax.

280 of these redundancies relating to positions in the corporate office and shared services areas were announced on 24 October. Over 520 further redundancies are now in the process of being implemented across the group’s operating businesses. The full impact of these financial savings is anticipated to be in place from 1 January 2001, delivering a saving of $70 million in the year ended 30 September 2002.

Mr Malcolm Broomhead said "The efficiency measures that Orica has announced today are part of a three fold approach to reversing the fortunes of the company and creating wealth for our shareholders. This approach is focussed on efficiency, culture and strategy.

The first stage is to improve the performance of the company in order to produce a greater on the funds invested in the company. This step has involved streamlining and focusing our businesses and reducing overheads. The substantial increase in shareholder value available from these efficiency measures has made it a priority in our value recovery drive. For example the $70 million after tax benefit in 2002 from the actions announced today exceeds the total operating profit for 2001.

Longer term improvements in the business will be achieved not only through an operational focus but also by cultural change. I passionately believe that implementing a performance and accountability culture will bring tangible and improved results in financial performance and in the satisfaction and motivation of our people.

In relation to strategy, we have initiated a review of the current business segments to determine their contribution to the company’s performance. This review will form the basis for long term decisions regarding the appropriate portfolio mix for Orica.

In summary, Orica is taking strong action to improve our results and I am enthusiastic about the prospects for the company. The road to recovery will not be easy and will take time but the Board, employees and I are fully committed to improving Orica’s financial performance."

Business Performance - Overview:

The mining services business achieved a significant increase in sales in all regions. In total, sales increased 24% over the preceding year. However, profitability declined as margins were squeezed by higher raw material costs.

Increased raw material costs and lower volumes in the trade paint, protective coatings and powders businesses due to lower activity in the building and construction industry had an adverse impact on the earnings from the consumer products businesses.

Profitability of the fertilizers business increased by 80% reflecting improved pricing on manufactured nitrogenous fertilisers, increased sales volumes and record production levels from manufacturing facilities. Sales of crop protection products through Crop Care were reduced as a result of adverse weather conditions and the termination of the Syngenta distribution agreement.

The chemicals business delivered a 22% profit improvement despite the slowdown in the building and construction industry. Development of new business and a strong focus on cost control and pricing more than offset the lost earnings from the Polyurethanes business sold in 2000.

Australian Vinyls Corporation and Qenos continued to encounter difficult trading conditions and poor demand for product.

Further detail on the performance of each of the Orica businesses may be obtained from the profit report issued to the Australian Stock Exchange and available on the this page of Orica's website.