Job cuts expected at Orica as explosives demand drops
ORICA chief executive Ian Smith has flagged more job cuts at the explosives maker, where he has brought in management consultants to perform cost reviews and confirmed the company may exit its $1.2 billion-a-year industrial chemicals business through a spin-off or sale.
The Melbourne company, which has a plant in Gladstone, had its biggest one-day slump in 10 months on Tuesday after it missed first-half earnings expectations and downgraded full-year earnings guidance because of depressed coal prices and production that resulted in a 2% drop in explosives demand.
The guidance downgrade said Orica expected to meet or exceed its 2013 full-year profit of $592.5 million, down from previous guidance that profit would rise.
Speaking after the earnings release, Mr Smith warned that if coal prices continued to fall, more production would be cut and Orica might report a drop in full-year earnings.
"The second half is contingent on the volumes we get out of coal," Mr Smith told The Australian.
"If coal prices were to come off in the second half we expect that would impact the volumes of coal."
Mr Smith revealed that Orica had cut 1000 jobs in the past year and there were more cuts to come.
The company announced a statutory net profit after tax of $242 million for the half year ended March 31, compared with the previous corresponding period of $263 million.
The result was driven by lower mining services volumes and a reduced profit contribution from chemicals.
Overall sales revenue of $3.36 billion was up 1% on the previous period.
Global explosives volumes were down 2%, largely due to the demand profile of international coal and Latin American metals markets.
In Australia, explosives volumes have grown by 5%, driven by a 40% increase in volumes in the Pilbara offset by relatively flat volumes on the east coast.