Commodity concern leads Orica to hold off on outlook
Low prices for commodities such as oil and coal continue to make it challenging for mining and energy companies and by extension explosives supplier Orica.
Orica chief executive Alberto Calderon told shareholders at the company’s annual general meeting yesterday that since early September, the thermal coal price had fallen by about 16 per cent, iron ore by 20 per cent, copper by 20 per cent and oil by 49 per cent.
“With commodity prices expected to stay subdued, the volatility affecting our customers in the mining sector is expected to continue,” he said.
Mr Calderon said it was too early in the financial year to update Orica’s full-year outlook. “In broad terms, however, the environment remains very challenging for us and our customers,” he said.
When Orica released its full-year financial results in November, it said it expected some improvement in earnings in fiscal 2016, given no further deterioration of key commodity prices.
Mr Calderon said the mining sector would recover in the medium to long term, as it had always done, and Orica would be ready.
Meanwhile, the world still needed roads, infrastructure and buildings, and Orica’s products were fundamental to their development.
Despite the slowdown in the mining sector, the world would continue to increase its demand for copper and aluminium, and even demand for coal was expected to grow about 2 per cent a year.
Mr Calderon said Orica would also roll out innovations such as its world-first wireless blasting system, which it said has the potential to change blasting practices to provide greater value to Orica’s mining customers.
Orica posted a $1.3 billion loss in fiscal 2015 because of a huge asset writedown.
The company has been forced to restructure operations, slash jobs and change its senior management over the past year to counter the downturn in the mining sector.
New Orica chairman Malcolm Broomhead, who was chief executive of Orica from 2001 to 2005, acknowledged that Orica’s performance had been disappointing and unacceptable.
He said the company’s earningsper-share performance, the asset writedowns and company culture had not been what was expected.
“This outcome was, in our view, driven by poor capital allocation decisions on the one hand, a domineering culture and lack of transparency on the other hand,” Mr Broomhead said. AAP