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Orica Posts $1.26 Billion Loss; Cancels Share Buyback

Orica Posts $1.26 Billion Loss; Cancels Share Buyback
Nov 18, 2015 By Simon Herrmann

Orica (ASX: ORI) announced a statutory net loss of $1.26 billion and cancelled its share buyback program in its FY15 financial results today.

The $1.26 billion loss was due a non-cash impairment charge of $1.69 billion on the carrying ground value of the company’s ground support business, ammonium nitrate (AN) assets and other assets across the company in light of the challenging market conditions and oversupplied AN market.

Before the non-cash impairment charge, the company’s NPAT was $417 million while EBIT was $685 million. The company had provided a guidance downgrade for FY15 results in August this year.

The total AN production volumes were 3.76 million. Earnings per share was reported at 113 cents as compared to 153 cents in the previous year. The company has decreased its net debt to $2,026 million, which is 9% lower than pcp. Final dividend remains unchanged at 56 cents.

According to Managing Director and CEO, Alberto Calderon:”2015 was a challenging year for Orica, our industry and our consumers. However, we have taken decisive action in response to the industry headwinds to best position Orica through the cycle, including fundamentally changing our operating model, executive and senior leadership teams, improving our customer contract profile, and reducing production to balance Australia’s east coast AN supply.“

The CEO also mentioned that the industry is currently experiencing the most dramatic mining downturn in the past two decades. The company reduced its overall explosive volumes by 1% and reports the reduction in EBIT was due to temporary market impacts. The company assumes these headwinds will remain in a short to medium term period. The company also aims to prepare itself to capture the benefits once commodity volumes begin to recover.   

Orica had announced a share buyback program in April this year for $400 million to be purchased over 12 months. The company purchased shares worth $53.5 million so far but has cancelled the buy-back program with immediate effect after reviewing challenges in operating environment.

ORI is trading at $15.43 as at 10:14 AM (AEDT) and is down approximately 18.6% year to date.

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Simon Herrmann Author: Simon Herrmann Nov 18, 2015

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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