Com­mod­ity con­cern leads Orica to hold off on out­look

Kalgoorlie Miner - - BUSINESS - Mel­bourne

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

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