Explosives group Orica
(ASX:ORI) is confident that the 2022-23 year will be better than the one just ended on September 30, even after all those worries about higher energy costs, inflation and slowing global activity.
It signalled that in two ways – first up it said it expects the 2022-23 financial year will see earnings before interest and tax (EBIT) higher than the $579 million for the year to September just gone (subject to the impact of higher costs).
Secondly, it boosted total dividends for the year by nearly 50% in one of the largest rises by a major industrial stock this year.
The final dividend was lifted to 22 cents a share from 16.5 cents a share previously, making for a total of 35 cents a share for the year to September.
That is up nearly 50% from the Covid impacted 24 cents a share paid the year before.
That’s a pretty confident forecast from Orica given that there have been few other companies to go that far in the June 30 and September 30 reporting periods.
Orica reported underlying earnings before interest and tax (EBIT) of $579 million, up 36% on the Covid hit 2020-21.
Net profit after tax (NPAT) jumped 52% to $317 million, on sales up 29% to $7.3 billion.
Improved market conditions (and less Covid) and a corporate strategy refocused during the Covid-19 pandemic led the improvement, according to CEO Sanjeev Gandhi.
He said the refreshed strategy focused on optimising operations, delivering smarter solutions, and partnering for progress across its four business verticals of mining, quarry and construction, digital solutions, and mining chemicals.
“Beyond blasting, we are accelerating customer adoption of our new technologies and demonstrating our strengths and capabilities in providing integrated digital workflows, from mine-to-mill,” Gandhi said.
“Mining Chemicals also continues to present growth opportunities for our business.”
In addition to strong earnings growth in all regions the company also received $90 million on its decision to exit its Russian business, and $33 million on its Turkish operations.
Return on net operating assets, a measure of how efficiently Orica is using its assets, increased to 11.4% in the latest financial year from 8.1% in 2020-21
An equity raising during the year of $691 million (at $16 a share) helped to the lower gearing level at September 2022 of 19.7%, below the target range of 30 to 40% and fund the purchase of geospatial tools designer and manufacturer Axis.
That $260 million cost could be worth up to $350 million if $90 million in performance payments fall due in the next couple of years.
The solid 2021-22 result, higher dividend and confident outlook saw Orica shares rise 7% yesterday to $15.076, which is well short of the $16 per share cost of the issue.
