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UPDATE 1-Australia's Orica cautiously optimistic on miners' recovery
May 15, 2017 / 11:38 PM / 7 months ago

UPDATE 1-Australia's Orica cautiously optimistic on miners' recovery

* Underlying profit rises to A$195 mln v A$182 mln forecasts

* Cost savings boost profit

* More explosives needed as mine plans return to normal (Adds CEO comments and profit details)

May 16 (Reuters) - Orica Ltd, the world’s No. 1 explosives maker, beat forecasts on Tuesday with a 2.7 percent rise in its half-year underlying profit, helped by cost cuts and higher sales, and said demand from its mining customers was improving.

However the company left its 2017 forecast unchanged for flat sales volumes for the year to September 2017.

Orica said underlying profit for the six months to March climbed to A$195.2 million ($144.7 million) from A$190 million a year ago. That beat an average forecast of A$182 million from three analysts polled by Thomson Reuters I/B/E/S.

The stand-out business was the company’s Australia Pacific and Indonesia arm, where volumes rose 10 percent and earnings increased by 12 percent. Cost savings of A$53 million also boosted the result.

“On the outlook we are still cautious,” Orica Chief Executive Alberto Calderon told reporters on a conference call.

He said the company’s mining customers were returning to more normal mine plans, which would require more explosives to remove rock compared to the past few years when miners dug the highest grade material, requiring less removal of overburden.

“But this recovery will be gradual,” Calderon said.

Orica said volumes either increased or were in line with last year’s figures across all its major markets.

The industrial explosives supplier declared an interim dividend of 23.5 cents Australian per share, compared with 20.5 cents a year ago.

The company last year ditched its policy of never cutting dividends and switched to a payout ratio of 40 to 70 percent of underlying earnings to support its balance sheet and avoid a credit downgrade. ($1 = 1.3488 Australian dollars) (Reporting by Rushil Dutta; Editing by Richard Pullin)

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