Orica’s Share Price Dips 3.49%

Since November last year, Orica Ltd [ASX:ORI] has been decreasing in share value significantly.

This morning they dipped 3.49%

Founded in 1874, standing at a market cap of $6.807 billion and an enterprise value of $8.47 billion, Orcia specialises in manufacturing and distribution of mining and tunnelling systems to the Australian mining industry.

They offer a huge range of equipment which align with mining fundamentals.

What’s the cause of their struggle?

Part of their struggle stems from maintenance shutdowns at their Kooragang and Yarwun plants, as well as construction problems at the Burrup plant.

These issues impacted Orica’s productivity rate and earnings.

Increased competition are forcing higher input prices in the cyanide market, as a result margins are being driven down.

Burrup was originally planned to be fully developed by 2015, however construction was concluded by September 2017, delaying the overall process of productivity.

Though the plant will not be fully operational until later on in the year.

The Australian Financial Review reported that Orica stated:

The joint venture operating partner, Yara, is addressing issues related to the construction quality of heat exchangers which have shown some premature cracking… it is expected that the plant will be operational towards the end of this financial year.’

Orica have spent millions on the plant over a span of five years, with hopes to supply explosives to the iron ore miners in Pilbara.

Plans for 2018 and beyond

Orica expects stronger performances during the second half of 2018, as volume is expected to grow as well as job cuts which could save up to $30 million to 2019 and onwards.

Last year Orica hinted their full year earnings in 2018 would be similar to their earnings in 2017.

Orica stated that they do not expect any further deterioration in the company’s earnings or performance.


Ryan Clarkson-Ledward,
For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

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