Orica Expects Recovery in Mining Sector to Continue in 2018

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia--Orica Ltd. (ORI.AU), one of the world's top suppliers of commercial explosives and sodium cyanide for gold mining, said it expects the mining industry's recovery to continue over the year ahead but cautioned there will be a lag before that makes a material difference for services companies.

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The Australian company, which was buffeted by a rise in raw-material costs and a firmer local currency over the last year, said the mining sector had begun a recovery from the severe slump that began in 2015 with sharp falls in commodity prices.

"We expect this recovery and the normalization of long-term mining plans that it implies to continue in 2018," said Alberto Calderon, a former BHP Billiton Ltd. (BHP.AU) executive who has been chief executive and managing director since May 2015.

The company forecast an about 5% increase in ammonium nitrate volumes over the coming fiscal year, after rising 3% in the past year to 3.65 million metric tons.

"In this environment, increasing our AN volumes and delivering significant net benefits from our business improvement initiatives, has been a very good result," Mr. Calderon said.

Net profit slipped almost 1% to 386.2 million Australian dollars (US$295.4 million) over the 12 months through September from A$389.1 million the year before, matching a 1% fall in sales revenue to A$5.04 billion from A$5.09 billion, the Melbourne-based company said Monday.

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Orica said it faced increases in material costs that couldn't be recovered from existing contracts, particular for natural gas and ammonia, as well as the affect of low pricing across explosives and cyanide products and the impact of the Australian dollar rising against most major currencies.

Founded in 1874 as a producer of explosives for miners in the Victorian gold fields of southeastern Australia, the company sells blasting systems to the mining, quarrying, oil and gas, and construction markets. In addition to sodium cyanide, it also provides ground support in mining and tunnelling.

The company said ammonia nitrate volumes were up strongly in the Australia-Pacific and Indonesia region, Orica's biggest market, thanks to strong demand from Australian coal and iron-ore miners. Across North America, overall explosives volumes were 4% lower, but were up in Latin America and across Europe, it said.

Orica said it will pay a final dividend of A$0.28 a share for a full-year payout of A$0.515, up 4% on the year before.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

November 05, 2017 17:04 ET (22:04 GMT)