23 May, 2006
Orica today announced a Net Profit After Tax and Significant Items for the six months ended 31 March 2006 of $123 million, down 1% over the first half of 2005. However, Net Profit After Tax and Before Significant Items was strong at $146 million, up 14% on the first half of 2005. Sales revenue was up 9% on the previous corresponding period.
An interim dividend of 26 cents per share was declared, up one cent on the 2005 interim dividend. The interim dividend will be franked at 9 cents per share.
Orica’s Managing Director and Chief Executive Officer, Graeme Liebelt, said that the results showed the strength of underlying earnings, particularly in the Mining Services and Chemical Services businesses, which both delivered record results.
These businesses are showing strong volume growth. We believe that trend is set to continue as our customers in the resources sector continue to drive for more volume from existing mines and as new mines are developed around the world.
The Fertiliser division also performed well, where the former subsidiary Incitec Pivot Limited had increased underlying earnings in the first half by 52%.
The Consumer Products division had faced tougher market conditions and, as a consequence, its earnings were down 3% on the pcp.
Given the tough market conditions Consumer Products has faced, its result for the first half was satisfactory, Mr Liebelt said.
He also commented that, as foreshadowed, the Chemnet business’ earnings were down 25% and that this reflected a range of factors, including softer market conditions and integration problems with some recent acquisitions. As previously announced, Chemnet has commenced a restructuring program which will position the business to meet Orica’s 18% Return On Net Assets criterion from 2007.
Mr Liebelt said that with the recent sale of IPL and Orica’s share of the Qenos joint venture, the long standing program of major portfolio reorganisation was now complete. The remaining Orica business platforms offer plenty of growth potential as well as a less volatile earnings stream, he said.
Our main focus now is on the integration of the acquired Dyno Nobel businesses, the soon to be commissioned major uprate of the company’s Yarwun ammonium nitrate facility and the deployment of the proceeds of the sale of IPL in a manner most accretive to shareholders.
We will continue to seek business efficiencies and to grow our current businesses either by organic growth, strategic capital investments or acquisitions where we can meet our investment criterion of 18% Return On Net Assets, Mr Liebelt said.
Commenting on the outlook for the remainder of 2006, Mr Liebelt said that after the divestment of Incitec Pivot Limited, and excluding earnings from newly acquired Dyno Nobel businesses, there would be earnings growth in 2006 compared with 2005, influenced by general economic conditions.