Orica delivers a decade of underlying profit growth

Orica today announced a net profit after tax and individually material items of $642 million for the full year ended 30 September 2011. In 2010, net profit after tax and individually material items, including the profit from the demerger of DuluxGroup, was $1.3B. Excluding the earnings contribution from DuluxGroup1 in the previous corresponding period (pcp), net profit after tax before materially individual items was up 4%.

The Board has declared a final dividend of 53 cents per ordinary share, franked at 100 percent.

Orica Managing Director & CEO Graeme Liebelt said the Company's performance for 2011 reflected the strength of strategic direction of the business and focus on fundamentals.

"Orica's strategy of concentrating on the mining and infrastructure markets has proven resilient with the delivery of a decade of underlying profit growth.

"While we faced some challenging conditions during the year, including the adverse impacts of foreign exchange, weather, price competition in Minova and the continued shutdown of the Kooragang Island ammonia plant, our employees have responded well.

"There has been a strong recovery in demand in the second half in some of our markets and this, combined with our continued focus on productivity, has delivered this pleasing result.

"Orica Mining Services achieved a record result with earnings before interest and tax (EBIT) up 6% to $817 million. This reflects stronger volumes and productivity benefits and, while pricing improved, the overall pricing environment during the year was relatively weak due in part to the appreciation of the Australian dollar. Mining Services has experienced continuing strong demand in coal and metals markets, particularly in North America, Australia and Latin America. Ammonium nitrate volumes were up 9% compared to the pcp with improved market conditions in most regions. Volumes from Electronic Blasting Systems again showed strong growth, improving 19% compared to the pcp.

"The Minova business has had a disappointing result with EBIT down 29% to $105 million. Strong competition, particularly in North America, continues to negatively impact margins. Volumes across most market segments improved although the Chinese market was down due to customers experiencing mining conditions which reduced demand for injection chemicals.

"While it has been a difficult year, we believe that we have seen the worst and expect Minova to improve in the next year.

"Chemicals achieved another record result with EBIT of $196 million, up 4% on the pcp. This result was achieved despite lower manufactured sodium cyanide volumes in the early part of the year, resulting from the planned shutdown of the Yarwun sodium cyanide plant to uprate capacity to 95ktpa. The full benefit of the uprate is expected in 2012.

"General Chemicals sales were up 6% on the pcp due to higher commodity prices and higher volumes. In Mining Chemicals, sales were up by 6% on the pcp due to improved pricing. Specialty emulsions achieved record sales volumes as a result of higher explosives demand.

"We continue to progress a number of significant growth projects, and some are nearing completion.

"The uprate of the ammonia plant at Kooragang Island to 360ktpa was initially completed in August. We regret that during the restart of the plant, an incident occurred resulting in an amount of sodium chromate containing hexavalent chromium being released, traces of which were found in northern parts of the adjacent Stockton area. Independent toxicology studies concluded that there was no threat to human health. The incident resulted in the plant being shut down. The company is working with authorities and the community to rebuild confidence in its operations and we expect to restart the plant later this calendar year.

"The expansion of the ammonium nitrate plant at Kooragang Island to approximately 750ktpa continues to be progressed as quickly as possible. Commissioning is expected late in the 2014 calendar year.

"The new 300ktpa ammonium nitrate plant at Bontang, Indonesia, is now in the commissioning phase and we anticipate production to commence in the first half of the 2012 financial year. The cost of the project is expected to be 10% below the initial estimate. This project has been a highlight for Orica, including the achievement of an outstanding safety record during its construction.

"Construction of the $100 million detonator plant in Nanling, China is behind schedule but under budget and commissioning is expected in late 2012.

"We have achieved another solid result in 2011 in challenging conditions. We have maintained a sound balance sheet, our financial coverage ratios are strong, and we are well positioned for the growth opportunities ahead. The commodities market outlook is robust, and we are in a strong position, strategically and operationally, to participate in the market growth," Mr Liebelt said.

Orica expects Group net profit after tax (pre individually material items) in 2012 to be higher than that reported in 2011, subject to global economic conditions.

7 November 2011