Orica boss warns big research spend could be a slow burner

ORICA chief Alberto Calderon says the explosive maker’s move to spend more on research and development will pay off with its wireless detonation technology a “game changer” for the mining industry.

The Melbourne-based explosives and chemicals giant yesterday announced it would increase its research and development budget by $40 million as it unveiled a profit report which failed to impress investors.

Shares in the company slumped by as much as 12 per cent in intraday trade — wiping close to $1 billion from its market value — after Orica’s profit missed expectations and the company maintained a cautious outlook for the year ahead.

Net profit rose 13 per cent to $386 million for the year ending September, Orica reported.

Revenue fell 1 per cent to $5 billion while underlying profit, which strips out one-offs, was also down 1 per cent to $386.2 million.

Higher gas prices, a stronger local currency and the renewal of contracts signed during the peak of the mining boom on less lucrative terms weighed on the bottom line.

Mr Calderon said that while the mining sector had begun to recover throughout 2017, there would be a lag before the better times showed up in the performance of service providers such as Orica.

Mr Calderon said investors appeared to have been thrown by Orica’s extra spending on research and development. But he said the extra spend was a positive as the technologies Orica was working to prove were going to be an important part of the company’s earnings.