A big half year for explosives and ammonia group Orica
(ASX:ORI), with revenue up more than 30%, underlying earnings up more than 30% and interim dividend also up more than 30%.
Orica reported a 31% increase in first-half revenue to $4 billion as it passed on cost rises in the form of higher prices to its mining customers
The world’s biggest explosives maker lifted revenue by $1 billion in the six months as it got ‘more bang out of its bucks’.
Earnings before interest and tax rose 32% to $323 million, topping market forecasts for a 25% lift.
Interim dividend of 18 cents per share was up more than 30% from the previous period’s 13 cents per share.
CEO Sanjeev Gandhi said in the release to the market that the company had delivered another set of improved results.
“The 32% increase in underlying earnings reflects the embedded commercial discipline across our business and the focus on quality of earnings. Our teams worked hard to bring forward recontracting in the second half of the last financial year, the benefits of which we are seeing flow into these first half results.
“The external market conditions, while challenging, have highlighted the strength of our people and unmatched global asset and product portfolio, which has enabled us to adapt and manage volatile external operating conditions. Sustained high commodity prices have fuelled demand for our products and services, and driven customers to Orica’s specialised products and technology offerings to deliver further productivity gains and support their sustainability goals.
“With the completion of the Axis acquisition and growth in our existing Digital Solutions vertical, we have created a new reporting segment that provides increased transparency. The Digital Solutions segment includes Orebody Intelligence; Blast Design and Execution; and GroundProbe. The Axis integration is progressing well and has opened up new international markets for the business.”
Orica said the strength of Orica’s performance “is expected to continue in the second half” but caution that the ‘seasonality of earnings will be less skewed to the second half compared with FY2022.”
The company said the previous drivers of earnings growth remain – “Anticipated growth in global commodities demand, continued commercial discipline and the increased adoption of advanced technology offerings, and contributions from the recently acquired Axis Mining Technology business.”
But the company said it “continues to remain cautious of external challenges from geopolitics, inflationary pressures, higher energy costs, and supply chain dislocations. The business will continue ongoing cost efficiency initiatives to reduce the impact from these pressures.
“Capital expenditure is expected to be within $400 million to $420 million, higher than previous corresponding period (pcp) due to sustainability and sustenance projects. Depreciation and amortisation is expected to be in line with the pcp.”
Commenting on the full year 2023 outlook, Mr Gandhi said, “Demand for critical minerals remains strong driven by the global energy transition. We expect increased customer activity to continue, as well as increased demand for our products and services and breakthrough technology solutions.
“While the ammonia landscape has changed during the half, the security of supply is still a challenge globally, one that Orica will continue to navigate with the strength of our global manufacturing and supply network.”
The shares ended up 0.8% at $16.61.
