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Explosives giant Orica has downgraded its guidance and raised the possibility of cutting its ammonium nitrate supply as it reported a 3 per cent drop in half-year profit to $211 million.


The world's biggest supplier of mining explosives this morning said that it expects full-year global explosives volumes to be "around 3.75 million tonnes" compared with previous guidance of 3.8 million to 4 million tonnes.


Amid a sharp downturn in the mining sector, which Orica supplies, the company said that "explosives prices have been substantially reset" and the full impact will hit Orica in the second half of the year.


Interim chief executive Alberto Calderon, a former BHP Billiton executive, said that market conditions are "unquestionably difficult".


"Orica is continuing to take action to mitigate the impact of market headwinds to build a foundation for earnings resilience through the cycle," he said.


"While the mining price boom has ended, Orica's operations are more closely correlated to production volumes, which have remained steady."


With many analysts expecting the Australian ammonium nitrate market will move into oversupply of some 500,000 tonnes as new capacity is brought online, Mr Calderon hinted that he may consider cutting production.


In early trade, Orica shares are 2.4 per cent lower at $19.70.



it break through upside resistance and looks more of upside to come---------at 21.20......

sadly i've been shacked out awhile ago........... :sadsmiley02:

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....former BHP executive and current Orica CEO Alberto Calderon .... explain[ed] to the Melbourne Mining Club what was behind BHP's productivity optimism.


He explains that the mining industry is embracing robotics, automation, big data and the internet-of-things, which are transforming every element of the mining value chain ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâہ¡ÃƒÆ’‚ from exploration, mining and processing to transport. New technologies are enabling miners like BHP to lift utilisation rates, operate more precisely, reduce maintenance costs and increase asset life.


Perhaps the biggest single change to mining is the planned use of Wi-Fi to trigger explosives. BHP is working with Orica on this development and the new explosives technology is a key reason why BHP is so optimistic about cost reduction. Blasting is one of the few processes in the mining value chain that to date remains largely untouched by automation.


Last year, Orica commercialised the world's first wireless detonator ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâہ¡ÃƒÆ’‚ which uses wireless technology to initiate blasts through rock, water or air from surface control rooms. With the manual task of connecting wires removed, BHP will slash the costs of its most labour-intensive processes.


Orica believes that just as the introduction of ammonium nitrate was an industry changer in the 1950s and 60s, so the automation of drill and blast will be a gamechanger for the 2020 industry....



- probably benefit the big miners more than ORI?



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Spotlight on Orica


Orica (ASX: ORI) is the worldâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s largest provider of commercial explosives and innovative blasting systems for the resources and construction industries, a leading supplier of sodium cyanide for gold extraction, and a specialist provider of ground support services in mining and tunnelling. The business employs 11,500 people, servicing customers across more than 100 countries.


This week, ORI shares rose to a 52-week high and closed up 8.9% for the week following its investor day on Tuesday. The day highlighted the fact that ORIâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s investments in technology and automation have started to produce efficiency benefits. ORI said its ability to utilise digitally-enabled blasting has allowed ORI to reduce drill costs, improve productivity and increase margin growth. The day further highlighted the continuingly improving business conditions globally.

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Bit of a turnaround story - FY18 A$48m loss - FY19 A$245m net profit



Melbourne: Orica (ASX: ORI) today announced statutory Net Profit After Tax for the 12 months

ended 30 September 2019 of $245 million (FY18 $48 million loss) and NPAT before individually

significant items of $372 million, up 15% on the prior corresponding period (pcp). Underlying

earnings per share increased by 14% to 97.9 cents per share.


Orica Managing Director Alberto Calderon said: âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“Our FY19 financial result provides evidence of the

continuing uplift in our operating and financial performance.


âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“Oricaâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s manufacturing and cost performance is improving across the board. Volumes are growing

and our market-leading technology solutions are gaining traction with customers. Our growth

drivers are starting to deliver.


âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“All of our regions are performing strongly with Europe, Middle East & Africa reporting a particularly

pleasing result in FY19 following focused efforts to improve this business. Increased penetration of

our technology-based blasting solutions and contract wins have driven sales revenue 9% higher for

the period.

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“The increase in Australia Pacific & Asia volumes was led by 6% growth in Australia, with market

share in the region continuing to increase.


âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“Consistent with our previous updates, progress on rectification at Burrup continues in line with our

plan, and the plant is expected to make a positive contribution to earnings from the second half of



âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“We are particularly pleased with the ongoing strong performance of our GroundProbe business

which continues to deliver results ahead of expectations. We anticipate this exceptional business

will deliver 20% Return on Net Assets (RONA) over the next three years. After several years of

management focus the Minova business has also delivered a signficantly improved result in this



Capital Management and Dividends

Oricaâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s gearing (34.9%) remains comfortably within the companyâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s revised target range of 30-40%.

The Board has declared a final ordinary dividend of 33.0 cps (5.0 cents franked), bringing the full

year dividend to 55.0 cps. The final dividend is payable on 13 December 2019 to shareholders

registered at the close of business on 13 November 2019.



The outlook for FY20 and beyond is positive. Orica anticipates higher earnings in FY20

underpinned by increased demand and product mix across all regions and the further take-up of

our market-leading technology. Earnings contributions expected from the Burrup plant will feed in

to higher earnings from the second half. It is expected earnings will be skewed to the second half

of the year.


âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“While there are many external factors that can impact our performance, Oricaâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s efforts to improve

every aspect of operations within our control is starting to deliver results. We are optimistic this

early momentum will be maintained and grow in the years ahead,âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ Mr Calderon said.


FY20 capital expenditure is anticipated between $370 million and $390 million (excluding Burrup)

with a continued focus on growth capital and plant reliability


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James Marlay ( Livewire Markets ) :  Simon, same question for you. Have you got a stock that you think is a candidate for an earnings upgrade that you can tell our readers about today?

Simon Conn ( Investors Mutual  )  :  I think Orica is one that has been underestimated by the market. You have got a new management team who are driving a harder focus on the business. They have put the Minova business up for sale. They are selling land, so paying down debt, and refocusing the portfolio on some of their high quality mining technology.
So, clearly mining prices have been good, and we are seeing that now come through with mining volumes. But also the other benefit they are receiving is a low Aussie dollar and a high gas price is driving beneficial pricing opportunities for their ammonium nitrate.


SC :  .... So, obviously being the largest explosives operator in Australia, and in several countries overseas, puts them in a strong market position in those incumbent markets. So, you have got a new management team, you have got a price that does not reflect the turnaround of the business. You have got volumes coming through, and a leader in the field in technology, which we think that the new management team will leverage, far better than they have in the past.


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Orica has been at a roll, closing recently at $17.20, a 40 per cent rise in the share price over the past 12 months

Now in TH as an acquisition and capital raise announced. Placement will be conducted at A$16.00 per New Share.

Orica has entered into a binding agreement to acquire Axis Mining Technology, a leader in the design, development and manufacture of specialised geospatial tools and instruments for the mining industry
• Represents a highly strategic acquisition and a valuable addition to the Orica Digital Solutions platform, creating a leading full service Orebody Intelligence business and positioning Orica to become the first integrated, end to end, mine to mill solutions provider for the mining industry.
• Axis geospatial technology accelerates Orica with its capabilities to support new mineral discoveries required for decarbonisation ... as new mineral discoveries are increasingly located at greater depths and demand more precise geophysics. Axis exposure to gold and copper also accelerates Orica with its broader commodity mix objectives
• The combination of Orica and Axis is expected to deliver compelling growth opportunities for both businesses, through its combined global network and capabilities
• Acquisition purchase price comprises upfront cash consideration of A$260 million and a deferred earn out payment up to a maximum of A$90 million, contingent on financial performance and other conditions being met
• Implies an acquisition multiple of 11.8x FY22F EBITDA (excluding pro forma synergies) based on the A$260 million upfront cash consideration
• Acquisition (including both Upfront Consideration and Earn Out), and associated costs to be funded through the proceeds of a fully underwritten A$650 million institutional share placement. Orica will also offer a share purchase plan capped at A$75 million to eligible shareholders in Australia and New Zealand

They are raising twice as much as the purchase (!), the reasons:

  • working capital and balance sheet capacity
  • more financial flexibility to navigate the inflation the company is battling with higher input costs;
  • the ongoing supply chain constraints that have necessitated finding new sources of ammonia and ammonium nitrate, sometimes under shorter payment terms; and
  • the geopolitical threats to supply, which have required higher inventory holdings to counter supply risks.
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Of course, the other side of this is that Orica is just a supplier of explosives to the mining industry, and attempts to do otherwise have not been accretive,.

Orica has raised $1.2 billion (net of transaction costs) since 2020 to execute $600 million of acquisitions. There is now 19% more equity since 2019 while dividends have dropped 38% over the same period.

An earlier CEO bought mining chemicals company Minova from a British private equity group for $857 million in 2006 and bolt maker Excel for $775 million the following year.

Minova and Excel were folded into a new ground support division and in August 2015, Orica impaired the carrying value of that division by $850 million. In December, Orica finally managed to sell it to German asset manager Aurelius for just $180 million.

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