Melbourne-based explosives manufacturer Orica Ltd. reported a statutory net loss after tax (NLAT) attributable to shareholders of A$173.8 million (approximately US$127 million at current exchange rates) for the year ended Sept. 30, 2021, on lower earnings, driven by turbulent global markets, disruptions by China’s ban on Australian coal purchases, and increased sea freight and input costs.
The loss included A$382.2 million in significant items after tax, while underlying EBIT dropped 30 percent year-over-year to A$426.6 million. Sales revenue from continuing operations was up just 1 percent, at A$5.21 billion.
For FY2020, Orica reported a statutory net profit after tax of A$82.3 million.
“Orica’s 2021 full-year results reflect a challenging year, with earnings from global operations impacted by adverse market factors including unfavorable foreign exchange movements, disrupted thermal coal trade flows due to trade tensions with China, increased sea freight costs, and rising input costs,” the company said in its Nov. 11 earnings statement.
Orica warned on Sept. 29 that its second-half FY2021 NPAT would take a big hit from individually significant items (GM Oct. 1, p. 27).
The biggest item is a non-cash impairment of A$317.6 million (A$276.6 million after tax)) following a review of the carrying value of the company’s 50 percent shareholding in Yara Pilbara Nitrates (Pty) Ltd., the joint-venture company with Yara that operates the Burrup technical ammonium nitrate plant in the Pilbara, in Western Australia. This has resulted in Orica recognizing a non-cash impairment of A$158 million against goodwill and A$160 million against property, plant, and equipment.
Among the other individually significant items, the company also recognized a $162.4 million non-cash impairment charge (A$162.4 million net) on the goodwill in the EMEA business segment, amid ongoing “challenging” market conditions.
On the plus side, Orica booked a A$112.4 million gross gain (A$118.1 million after tax) on the completion of the sale of land at Botany, New South Wales, in September.
But ammonium nitrate (AN) volumes were up 4 percent on the year, at 4.093 million mt, driven by the inclusion of a full year of Exsa SA, Peru, sales. Orica completed the acquisition of Exsa on April 30, 2020, after inking a deal to acquire a controlling stake in the company in February of that year (GM Feb. 28, 2020).
However, despite this, the net volume impact was unfavorable year-over-year given the reduction of high margin Australian East Coast volumes from disrupted thermal coal trade flows, and from lower sales volumes in Colombia and Cuba, Orica said.
Orica Managing Director and CEO Sanjeev Gandhi is more positive for Orica’s performance in FY2022.
“Subject to market conditions, the strong momentum from the second half of the current financial year is expected to continue into the 2022 financial year,” he said.
“We expect steady commodity growth in 2022, which will drive stabilized demand for explosives-related products and services, particularly in copper, gold, and quarry and construction markets.”
Orica will pay out a final dividend of 16.5 Australian cents per share, representing a payout ratio of 50 percent. This takes the full-year dividend to 24.0 Australian cents per share and a full-year payout ratio of 47 percent.
Selected financials for year ended Sept. 30
| A$ million | 2021 | 2020 | % change |
| Sales revenue from continuing operations | 5,207.9 | 5,143.0 | +1 |
| EBITDA from continuing operations | 762.7 | 913.6 | (17) |
| Total EBIT | 426.6 | 613.7 | (30) |
| NPAT before individually significant items | 208.4 | 299.1 | (30) |
| Statutory NPAT/NLAT after individually significant items | (173.8) | 82.3 |