Orica Ltd., Melbourne, reported statutory net profit after tax (NPAT) attributable to shareholders of A$76.7 million for the first-half ending March 31, 2021, down 54 percent from the year-ago A$165.2 million. The company had provided an earnings update in February, warning that first-half EBIT would sink below expectations (GM Feb. 26, p. 28). First-half EBIT came in at A$151.8 million, down 51 percent from the year-ago A$308.6 million.
The EBITDA drop was less severe, down 25 percent to A$361.5 million from A$479.7 million. The decline was attributed to lower volumes in high margin markets, the non-repeat of carbon credits in Canada, and adverse FX movements. Additional impacts were SAP costs and arbitration costs in relation to the Burrup plant rectification works.
Revenues were off 9 percent at A$2.62 billion from A$2.88 billion, as were ammonium nitrate volumes, which were 1.94 million mt when excluding the 160,000 mt from Peru’s Exsa SA, which was acquired April 30, 2020 (GM Feb. 28, 2020).
Orica said the most significant driver of reduced explosives volumes was the impact of COVID-19 on customers across various markets, most notably Asia, Latin America, Europe, and the Middle East. Social unrest in Peru and strikes in Chile further impacted product volumes and services activity in Latin America, while Australian trade tensions with China affected the high margin thermal coal market on Australia’s East Coast. This was offset by increased volume from iron ore customers in the Pilbara region at lower margins.
“Our first-half financial results are in line with our February market update and reflect the impact of various market factors,” said Orica Managing Director and CEO Sanjeev Gandhi. “As we detailed in the update, ongoing COVID-19 disruptions, geopolitical issues, and unfavorable foreign exchange movements impacted us in the half.
“While the factors that impacted us in the first half are expected to largely reverse over time and the fundamentals of our business remain sound, we remain cautious about the short-term outlook,” said Gandhi. “It has been encouraging to see volumes start to increase at the end of the half. While we expect a better second half than the first, given uncertainties remain around market factors, we expect the second-half EBIT to be lower than the pcp.”