ORICA PROFIT GROWTH IN 2009 DEMONSTRATES RESILIENCE

Orica today announced a net profit after tax and individually material items of $542 million for the full year ended 30 September 2009, up $2 million on the previous year.

Net profit after tax was a record $646 million, up 13% on 2008, excluding the loss on individually material items of $104 million.  Sales revenue increased 13% to $7.4 billion. 

The Board has declared a final dividend of 57 cents per ordinary share, franked at 20 cents per share, representing an increase of 2 cents on the 2008 final dividend.

Earnings per share (EPS) before individually material items were 174.6 cents, up 3% on 2008.  This is the eighth consecutive year of EPS growth.

Orica Managing Director Graeme Liebelt said the strong result in very challenging market conditions, demonstrated the strength and resilience of Orica’s strategic position and its ongoing focus on controlling the business fundamentals of cost, cash and productivity.

“To achieve double digit growth in earnings before interest and tax (EBIT) in this environment is an excellent result. This year, perhaps more than any other, all that strategic work we have done over the past decade or more is being played out in our results. It is that, combined with a tight control of the business fundamentals – cost, cash and productivity – that is at the core of the profit growth this year.

“Operating cash flow improved by 16% to $855 million. Productivity and synergy benefits of $101 million were delivered and underlying trade working capital improved by $51 million.

“We have been able to respond quickly and effectively to the changing circumstances,  demonstrating strong financial discipline to achieve these very good results.

“Orica’s Mining Services business achieved a record result with sales up 14% to $4.1 billion and EBIT up 16% to $737 million. This was achieved in spite of difficult trading conditions due to cost management and restructuring initiatives across all regions, the continued benefits of improved ammonium nitrate pricing, falling input costs and positive foreign exchange impact.

“All regions achieved good earnings growth except for Europe where earnings decreased as a result of significant volume decline, particularly in infrastructure markets.
 
“The Chemicals business achieved record results with sales up 10% to $1.5 billion and EBIT up 17% to $170 million.  The Mining Chemicals business had a record year primarily due to stronger demand for sodium cyanide, which we expect to continue in 2010.

“The General Chemicals business suffered significant volume declines due to the continued slowdown in the automotive and manufacturing sectors in Australia and New Zealand.  The merger of the former Chemnet and Chemical Services businesses is complete and resulting synergies delivered EBIT benefits of $12 million during the year.

“The newly named DuluxGroup achieved record sales and EBIT was up 5% to $129 million. In a market with declining volumes and increased competition, the business grew sales and market share, demonstrating the strength of its premium brands and excellent channel relationship management.

“EBIT was down by 3% in our Minova business due to difficult trading conditions in the US and Eastern Europe and under-recovery of steel input prices in the US. Fundamentals however were controlled well and we have now rebuilt those margins in the US steel business.

“For Minova businesses outside of the US, pricing and volumes remained steady with the business seeing strong volume growth in China.

 “Orica has moved quickly and effectively to manage the fundamentals of cost, cash and productivity in response to external market conditions without jeopardising our long term strategic focus. This has seen us progress with investments to ensure we capture the long term growth that we continue to see and to progress with important work in the area of research, development and innovation.

“That focus is supported by a strong balance sheet with relatively low gearing. With the successful capital raising last year and the recently extended debt facilities we are well positioned to fund our growth plans.

“We are making very good progress with the 300ktpa ammonium nitrate plant in Bontang Indonesia. Feasibility work continues on ammonium nitrate expansion opportunities in Australia and Latin America with the timing of these projects dependent on market conditions and an improvement in demand. The feasibility work for the uprate of the ammonia plant at Kooragang Island in New South Wales and the sodium cyanide plant at Yarwun in Queensland is progressing. 

“Orica’s businesses have performed strongly in 2009 and are positioned well for the future,” Mr Liebelt said.

Orica expects earnings growth to continue in 2010.  In light of the shape of the economic decline experienced in 2009, we anticipate first half conditions to be more difficult than those of the previous corresponding period. Subject to the rate of global economic recovery and the extent of further adverse movements in exchange rates, we expect Group net profit after tax (pre individually material items) in 2010 to be higher than that reported in 2009.

9 November 2009

• Analysts’ contact:  Anita Stevenson, Investor Relations Manager, (03) 9665 7844
Mobile: 0416 211 498
• Media contact: Lisa Walters, Communications Manager, (03) 9665 7538                    Mobile: 0421 585 750  
• Web site: www.orica.com