Melbourne-based explosives maker Orica Ltd. said it now expects to take a A$345-$370 million (approximately US$249-$267 million at current exchange rates) hit on its second-half FY2021 statutory net profit after tax (NPAT) from individually significant items.
Orica said this brings significant items for the full fiscal year to a reduction in its statutory NPAT of about A$342-$367 million when considering the A$3 million after-tax gain recognized in the first half of the fiscal year.
The biggest significant item is for the Yara Pilbara Nitrates (Pty) Ltd. joint venture operating the Burrup technical ammonium nitrate plant in the Pilbara, in Western Australia. Orica said following the impairment recognized by the joint venture, it has reviewed the carrying value of its 50 percent share. Yara International holds the other 50 percent. The review has resulted in Orica recognizing a non-cash impairment of A$260-$270 million after tax, which includes a full impairment of the goodwill associated with the investment.
The Burrup TAN plant recommenced operations in early May 2020 (GM May 8, 2020) after operations were stopped in July 2019 to undertake critical rectification work (GM Aug. 2, 2019). At full capacity, the Burrup plant can produce 330,000 mt/y of TAN.
Orica also expects to take an approximate A$145-$155 million non-cash impairment charge after-tax in the second half of FY2021 on the goodwill in the EMEA segment, amid the ongoing “challenging market conditions.”
The company also expects an approximate A$10-$15 million impairment for further redundancy costs in the second half as part of its global restructuring, but a positive after-tax gain of around A$70 million is anticipated from non-core land sales. This latter item comprises the sale of Lot 9 Botany in New South Wales, with the cash proceeds received on Sept. 7, 2021.
In terms of the company’s business performance, Orica said this continues to improve in the second half of FY2021, with ammonium nitrate (AN) volumes up from the first half (GM May 21, p. 28). First-half AN volumes were 1 percent off year-over-year at 1.94 million mt, and 9 percent off when excluding the 160,000 mt from Peru’s Exsa SA, which was acquired on April 30, 2020 (GM Feb. 28, 2020).
The company said all continuously manufacturing AN plants have been operating well during the second half. A planned turnaround at the Carseland plant in Alberta, Canada, started in September, with completion expected in October.
Orica reports its full fiscal-year 2021 results on Nov. 11.