Orica profit dips on lower demand

Explosives and chemicals manufacturer Orica has posted a 3 per cent dip in half-year profit to $211 million after being affected by reduced demand for its products in the mining sector.

The company reported a 5 per cent fall in earnings to $472 million, and a 20 per cent reduction in debt to $1.9 billion.

It also declared an interim dividend of 40 cents a share.

Interim chief executive Alberto Calderon said Orica was taking action to mitigate the impact of market headwinds, and was closely monitoring the ammonium nitrate supply and demand balance.

He said while the mining price boom had ended, Orica’s operations were more closely correlated to production volumes, which had remained steady.

The company’s transformation has so far included completion of supply contracts and the cutting of around 550 operational support roles.

“We have made significant progress in renewing and extending our customer contracts, albeit at prices more reflective of current market conditions,” Mr Calderon said.

Orica is a 45 per cent stakeholder in the Burrup joint venture, which is currently constructing a $US800 million, 330,000 tonnes per annum ammonium nitrate plant in the Pilbara.

The project, which is also 45 per cent owned by Norwegian company Yara International and 10 per cent owned by Apache Corporation, is over 95 per cent completed and is expected to be commissioned later in the year, with production ramping up in 2016.

CSBP, a subsidiary of Wesfarmers, last year completed a $550 million expansion of its ammonium nitrate plant at Kwinana to 780,000t per annum.

Orica shares were 5 per cent higher to $21.20 a share at 1:30pm.