Orica shares yesterday continued their fall from last week's inflated peak, even though directors unveiled a record profit and dividend for the interim period.
The shares lost another 61¢, or 4 per cent, to $14.16 on above-average volume and are now down 9.1 per cent from last week's $15.58 high.
However, at $14.16, Orica shares are still higher than at any time before 2004.
Chief executive Malcolm Broomhead yesterday unveiled a 26 per cent increase in interim profit to $122 million before abnormal costs. A 23¢ a share dividend was declared.
The increase mainly reflected the merger of the 70 per cent owned Incitec fertiliser operation with its former rival Pivot and a recovery in earnings in the sector.
"This is a good strong result, which has enabled an increase in discretionary expenditure on future products," Mr Broomhead said.
Current market estimates of a full-year profit of $316 million gave a "reasonable indication" of directors' expectations, he said.
But there was some disappointment in the market about the result, which may have driven the share sell-off. "The mining services operation was lower than I expected, which is a bit at odds with the above-average activity in the mining sector in general," said Paul Xiradis, of fund manager Ausbil Dexia.
While the mining services profit was up 3 per cent on revenues that were down 2 per cent, Mr Broomhead said the North American operations had been hit by a $51 million increase in ammonia costs that were not fully recouped by price rises.
The ammonia costs reflected increased gas prices and an adverse move in the exchange rate between the US and Canadian dollars. Orica's ammonium nitrate plant is located at Carseland in Canada.
He said the North American explosives business was to be subjected to "a more aggressive efficiency program" in a bid to lift margins further. The associated costs were covered by the market's full-year profit estimate.
The contribution from Orica's fertiliser interests jumped from a break-even result to a profit of $31.5 million in what is the industry's slow period.
The current half-year is traditionally the big profit contributor as it is farming's planting season, but Mr Broomhead was cautious.
"Between now and the end of June is the critical period for areas where the most fertiliser is placed," he said.
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