Orica profit of $602 million pleases investors

Diversified chemicals company Orica expects to lift its profit for the current financial year, despite subdued market conditions and weakness in its underground tunnelling and drilling division.

Orica reported a net profit of $602 million for the year to September – up 49 per cent from a year earlier when it had a $247 million write-down against its Minova business.

But excluding last year’s write-down, its profit was down 7.5 per cent year on year.

The profit numbers were well received by the market, with investors pushing shares up $2.27, or 11.6 per cent, to close at $21.81.

Orica supplies chemicals and explosives used in engineering, construction and oil and gas projects around the world. Its mining services division has been impacted by slowing global demand, as well as a push away from coal towards gas in the US market.

Orica said subdued conditions remained in explosives, excluding key mining markets such as the Pilbara in Western Australia and Africa, where growth was expected to continue.

The company declared a fully franked final dividend of 55¢ a share, up 2¢ on the same time last year.

Chief executive Ian Smith described 2013 as a below-average year and he expected a higher net profit in the current year.

He warned volatile market conditions could continue.

Orica’s full-year sales revenue was $6.9 billion, up 3 per cent from 2012. Its earnings before interest and tax was 4 per cent lower at $985 million.

Orica has been responsible for several chemical leaks from its plants in Botany and Kooragang Island in NSW. Last month, it was accused of trying to keep secret a report into whether mercury was leaking from its former chloralkali plant, which operated in Botany for almost 60 years.

Chief financial officer Craig Elkington did not comment on the claims but said it was working with officials from the NSW Environment Protection Authority and had improved its community engagement at both sites.

Orica also announced on Monday it had entered a three-year agreement with Esso Australia and BHP Billiton to purchase natural gas from Longford from 2017.

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