expects profit, mine decline a threat

Orica expects profit, but mine decline is a threat

Andrew Harrison | January 31, 2009
Article from: Dow Jones Newswires

ORICA chief executive Graeme Liebelt expects it to report its eighth year of profit growth but warns demand for explosives is weakening.

The company manufactures industrial and speciality chemicals, explosives and paints, and mining companies are major customers.

Orica's earnings have swelled because of productivity improvements, higher sales from expanded production and acquisitions, and higher explosives demand from miners.

Mr Liebelt said that in the three months to December 31, Orica's ammonium nitrate sales and the company's profit were ahead of a year earlier and "broadly in line with plan".

However, the company was not running at capacity, he said.

"Parts of our business are running at capacity but there are places where we are not," Mr Liebelt said.

"It tends to be local ... in New Zealand, for example, the consumer products business has been quiet for quite a while," he said.

Mr Liebelt said demand from the global quarrying and construction industries had declined, and activity in the sectors was down as much as 30 per cent.

Government economic stimulus packages for extra infrastructure spending would boost demand from the quarrying and construction industries.

The company was also experiencing weakening demand from coking coal, nickel and zinc producers but sales to thermal coal and gold producers were "holding up well".

However, demand would weaken.

Orica reported a net profit of $539.6 million for fiscal 2008. Underlying profit, which excludes significant items, was $572.3 million.

Mr Liebelt said after the annual meeting in Melbourne that the company did not expect to make any significant write-downs in its half-year results, expected in May