Slump hits explosives

SHARES in Orica tumbled today after the explosives and chemical company lowered its full-year earnings guidance, citing weaker global economics and higher costs.
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Justin Niessner

The company said it expected its group net profit after tax pre individually material items for financial 2013 to be about 10% lower than the previous year’s total of $650.2 million.

Mining services were flagged as a major factor in the reduction.

The company’s ground support business is now expected to break even in earnings before interest tax, down $17-25 million compared to the previous guidance.

Earnings before interest tax for the ground support business was $109 million in the prior year.

Lower than expected earnings for Orica’s Indonesian business have been linked to production setbacks at the Bontang ammonium nitrate plant in East Kalimantan.

Orica also cited softer global markets for explosives and sodium cyanide resulting in flat AN and bulk explosives volumes, and only moderate growth in sodium cyanide volumes year on year.

The company said it was implementing measures to address the performance issues in its ground support and European businesses expected to deliver benefits in 2014.

It also noted an ongoing general review of productivity initiatives and cost reduction opportunities across all areas of the company.

Shares in Orica were down 13.9% today at $18.08.