As a former Orica Employee, I can vouch for the fact that Broomhead has cut spending and staff to the bone. No capital or discretionary spending for 3 years. Some of this is unsustaniable in the long term. IT systems will need to be upgraded, technology advances implemented to gain produtivity increases etc...
I do not see a large turnaround in sales or margins in the next two years. So when plant and equipment needs to be replaced/repaired in approx 2 years, the costs will start to rise again. Static sales and rising costs mean reduced profits.
I still own about 1/2 my Orica Shares. Sold some at $9. I have revised my sale target from $10 to $11, but intend to hold for no more than two years due to the profit squeeze that I think will come.
Al Baby
ORI Price at posting:
0.0¢ Sentiment: None Disclosure: Held
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