Jump to content

ORI - ORICA LIMITED


ShareCafe

Recommended Posts

  • 1 month later...
  • Replies 48
  • Created
  • Last Reply

Top Posters In This Topic

  • 4 years later...

not a mention since 2009;

 

from Inside Business on Sunday 12 May http://www.abc.net.au/insidebusiness/conte...11/s3757169.htm

 

ALAN KOHLER, PRESENTER: Here's Orica CEO Ian Smith on miners cutting costs and the Australian dollar. Well Ian Smith, the mining industry seems to be clearly in cost-out phase now.

IAN SMITH, CEO, ORICA: Mmm hmm.

ALAN KOHLER: I mean, that puts you in the firing line, doesn't it?

IAN SMITH: No, we see it as just as much opportunity as threat. So ...

ALAN KOHLER: How's that?

IAN SMITH: When the miners are talking to us about, "How do we get our costs down?" We talk to them about how we can improve their productivity. So we've been running trials with mines in Australia, South America, etc. to demonstrate that if apply explosives in difference ways, we can actually improve their productivity to a far greater extent than any cost downward would deliver.

ALAN KOHLER: But it means, doesn't it, that whatever you do you're going to sell less to them, sell less of it to them?

IAN SMITH: No. Quite the opposite.

ALAN KOHLER: Really?

IAN SMITH: Yes. Over time, everyone agrees that overall demand driven by urbanisation, industrialisation around the world will push the demand for all of the base commodities up. So you either meet that demand with more supply, which is volume to us, or there are less projects on the go and the current mines get older, and as they get older their strip ratios go up, which means the amount of waste they've got to move increases to get to the same amount of ore, which is a volume increase for us.

ALAN KOHLER: I've read a survey of mining companies this week that said on average they're looking for a 13 per cent cost price decrease.

IAN SMITH: Yes.

ALAN KOHLER: Is that right? Does that accord with what you understand they're looking for?

IAN SMITH: Yes, but you've got to understand that how we contribute to their cost structure's between three and 5 per cent. So we're not a big constituent of their costs, but we can be a big constituent of how they improve their productivity on site.

ALAN KOHLER: So you've been on both sides of the fence, being a gold miner as well. What would you be doing now?

IAN SMITH: If I was a gold miner?

ALAN KOHLER: Yes.

IAN SMITH: We supply to gold miners now, so I'd be using even more cyanide and even more explosives.

ALAN KOHLER: (Laughs) Of course you would! The current reality of the mining industry in general does seem to be at odds with your stated desire to improve your margins by moving away from commoditised chemicals to more serviced-based. So they're trying to squeeze you and you're trying to improve your margins. Do you think you can do it at the same time?

IAN SMITH: Yes, it's called a win-win. So if we can help the miners improve their productivity, then we share in some of that productivity uplift. But some of the other margin growth we're going after in the company has little to do with our external customers. It's about how we run our manufacturing base, which is improving but can we improve further. That gives us greater margin growth.

ALAN KOHLER: How's the exchange rate been affecting you?

IAN SMITH: Oh, look, we'd love the exchange rate to keep going down. I think it cost us about $3 million in the first half. So, because ...

ALAN KOHLER: What cost you - the exchange rate cost you $3 million?

IAN SMITH: Yes. If the exchange rate was lower, then we would have picked up a benefit. But it's small dollars in the overall profile of the company.

ALAN KOHLER: It was felt that the Reserve Bank was trying to get the dollar down this week with the rate cut.

IAN SMITH: Yes, they should too.

ALAN KOHLER: Should they? What should they do?

IAN SMITH: Cut everything in their power to get it down. One of the arms of Orica is Bronson & Jacobs and we supply wholesale chemicals and that into cosmetics, food industry, whatever. So we're seeing the effect of the dollar that more and more imports are coming into Australia and less and less of those wholesalers and manufacturers that used to provide materials into that area are in place.

 

So we're picking up a bigger market share because of that because we're one of the last big ones left, but the overall state of the economy is being hollowed out.

 

ALAN KOHLER: The dollar did fall on Tuesday when they cut interest rates and went back up again on Thursday when the unemployment figures came out and then fell again on Thursday night ...

IAN SMITH: Overnight.

ALAN KOHLER: ... and Friday morning because the US dollar went up. So how do you reflect on all of that?

IAN SMITH: Oh, look, the overall trend for Australia's sake should be down. It's a minimal effect on us because over 50 per cent of our revenue's international, around 50 per cent's in Australia. So, it's a small effect on us. It's a small benefit if the Aussie dollar goes down. But for the sake of Australia and jobs into the future, we can't keep hollowing out the overall economy the way we are.

ALAN KOHLER: And how damaging is the hollowing out that you're seeing?

IAN SMITH: Well as I said, we have contact points right through the manufacturing base of chemicals, etc. in Australia and a lot of those smaller manufacturers, distributors, have been pushed out of business. They can't compete against imports.

ALAN KOHLER: Do you think there's a case in some cases for anti-dumping action?

IAN SMITH: Pretty hard to bring about. Long and costly. I think it'd be just nice that if there are any initiatives that can be brought to bear to push our dollar down, they should be enacted.

ALAN KOHLER: Obviously that has something to do obviously with what the economists called the handover from the mining industry to what they hope will be a hand over to the manufacturing industry to take up the slack when the mining construction boom ...

IAN SMITH: If there's one left.

ALAN KOHLER: ... finishes. How do you see that? Do you think that's - do you think there will be one left and do you think that there will be a smooth handover, as they say?

IAN SMITH: No.

ALAN KOHLER: No?

IAN SMITH: No. Look, manufacturing has been belted for an inordinately long time because of this high dollar, whatever. We've actually got to put some settings in place now so we do have a sector that can grow jobs, especially into the future.

ALAN KOHLER: Well leaving the dollar aside, what else needs to be done?

IAN SMITH: Oh, industrial relations, the flexibility of how you go about running your plants. At the moment we've suffered from a few years of a government that wants to institutionalise third party involvement, so that should be really backed off as well.

ALAN KOHLER: Well Tony Abbott released his industrial relations policy this week and have you had a chance to look at it and what do you think of it?

IAN SMITH: Um, it's starting to go in the right direction. The thematic about industrial relations is the Government should do everything in its power to make sure that, ultimately, employees and employees work together without a third party. I think what we've been suffering from over the last couple of years is a government that wants to institutionalise that you always need a third party. I see that as a lack of management if you have to resort to a third party.

ALAN KOHLER: There's a big focus on yield in the stock market at the moment. Now your cash flow is pretty good, pretty strong, I think, much stronger than everyone expected. Do you think you're going to engage in some capital management, and if not, what else are you going to do with the money?

IAN SMITH: We've been asked that a fair bit over the last week, as you'd imagine, with a lot of analysts and investors. We're just making point that this year we're still building Burrup. We've got decisions to make about whether we expand Kooragang Island, etc. When we get to the point of decision on those, then we'll review what we do with our capital management. At the moment, our payout ratio's about 54 per cent.

ALAN KOHLER: All the mining companies are starting to discover dividend, which - you've got to catch up. It's time you got with the strength.

IAN SMITH: Yes. As I said, we've been hearing the message. We've taken on board the message. But I think we're a little bit in front of ourselves if we think we can move just at the moment. We've got a progressive dividend policy. We'll stick with that at the moment. But if there's any opportunity to review over the next 12, 18 months, we will.

ALAN KOHLER: Thanks for joining us, Ian Smith.

IAN SMITH: Thank you.

Link to comment
Share on other sites

  • 2 months later...
  • 1 month later...
  • 1 month later...

On a weekly scale, ORI has triggered a number of Trinity warnings.

 

post-20537-1383006318_thumb.jpg

A break of the $21.50 resistance could be worth a punt; my next target is then $25.

On the other hand, if resistance holds, it could play out as a double top, dropping back to $17.50.

 

post-20537-1383006824_thumb.jpg

Link to comment
Share on other sites

  • 1 year later...

Explosives giant Orica will buy back up to $400 million worth of its own shares after completing the sale of its chemicals business to Blackstone.

The world's biggest supplier of mining explosives announced the on-market buyback plan this morning, which will take place over the next 12 months.

The company had indicated its intent to return capital to shareholders after the sale of the non-core chemicals division had been finalised.

"The share buyback reflects Orica's commitment to maximise returns to shareholders while preserving flexibility to respond to changes in the operating environment and maintain an investment grade credit rating," Orica chief executive Ian Smith said.

After a dual-track process, Orica decided not to demerge the chemicals unit and in November agreed to sell it to private equity heavyweight Blackstone for $750 million.

Orica's chief deal maker and head of strategy Andrew Larke has departed Orica and is the new chief executive of the Blackstone-owned chemicals business.

The chemicals manufacturing and distribution business has been named Ixom. Its major Australian customers include dairy giant Fonterra, crop protection group Nufarm, Orica, Caltex and BlueScope Steel.

"With a distinctive new identity and a renewed focus as an independent entitiy, we are committed to providing innovative chemical solutions to our customers and supporting their growth plans," Mr Larke said.

After transaction and separation costs, Orica will reap net proceeds of between $620 million and $650 million from the sale, which is close to the book value of the chemicals business.

Completion of the sale comes as iron ore and coal prices remain under pressure and a significant number of coal mines on Australia's east coast are losing cash.

This has left some analysts cautious on Orica given its mining customers are not expanding but looking to cut costs, and in some cases closing mines.

Orica shares are 2.3 per cent higher at $20.28.

 

 

Read more: http://www.smh.com.au/business/markets-liv...l#ixzz3TBLx0PSS

================

 

jumped in for a trade this morning get on at 20.25, looks it target 22ish with stops at 19.95.

 

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×
×
  • Create New...