According to the company’s website news release on November 9, 2022, Orica (ASX: ORI) announced a Statutory Net Profit After Tax (NPAT) attributable to the shareholders of Orica for the year ended 30 September 2022 of $60 million; and underlying earnings before interest and tax (EBIT) of $579 million, up 36 per cent on the prior corresponding period (pcp).
Key Financials
- Statutory NPAT1 of $60 million (pcp: Statutory Net Loss After Tax of $174 million), including $257 million significant items expense8 after tax
- Underlying EBIT2 of $579 million, up 36 per cent on the pcp, before individually significant items
- Underlying earnings per share3 of 76.4 cents, up 49 per cent on the pcp
- RONA4 of 11.4 per cent, up from 8.1 per cent in the pcp
- Unfranked final dividend of 22.0 cents per ordinary share, representing a payout ratio of 53 per cent
- Strong earnings growth in all regions; commercial discipline embedded across the organisation, with a focus on quality of earnings
- Sale of non-core assets and land progressed, including completion of Minova sale
- Technology offering strengthened through highly strategic acquisition of Axis Mining Technology
- Progressed decarbonisation of operations and increased accountability to sustainability commitments
CEO Commentary
Reflecting on the positive full-year performance, Orica Managing Director and CEO Sanjeev Gandhi said:
Strategy and Performance
“Our full year result reflects the strength and resilience of our team, and a commitment to our refreshed strategy, resulting in improved financial performance and growth across all regions.
"Our financial results in FY2022 are strong. Underlying earnings before interest and tax (EBIT) were $579 million, an increase of 36 per cent on the previous year. Statutory net profit after tax (NPAT) was $60 million including a $257 million significant items expense after tax.
“In November 2021, we refreshed our strategy centred on optimising our operations, delivering smarter solutions, and partnering for progress across our four business verticals of mining, quarry and construction, digital solutions, and mining chemicals. At the core, we continue to pursue organic growth from blasting and by expanding Orica’s presence across future-facing commodities. Beyond blasting, we are accelerating customer adoption of our new technologies and demonstrating our strengths and capabilities in providing integrated digital workflows, from mine-to-mill. Mining Chemicals also continues to present growth opportunities for our business.
“This year has presented both challenges and opportunities for our business, including geopolitical tensions, trade sanctions, strong global commodity prices, and security of supply risks. Our commercial discipline and collaborative culture, combined with the strength of our global manufacturing and supply network have positioned us well to capitalise on the current market conditions and opportunities presented by a growing commodities market.
Technology and Innovation
“We have focused on accelerating customer adoption of blasting technologies and digital solutions throughout the year, increasing our digital solutions adoption rate across the globe by 63 per cent on the previous year, well above target. In August 2022, we announced the acquisition of Axis Mining Technology to further strengthen our orebody intelligence capabilities and increase our unique customer offering, from mine-to-mill. Additionally, we introduced a suite of new products and services to the market, including our second generation WebGen™ 200, 4D™ bulk explosives technology, Cyclo™ and Avatel™ in partnership with Epiroc.
Sustainability
“To sustainably mobilise the earth’s resources is at the heart of Orica’s purpose. Environmental Social and Governance (ESG) performance and climate change continue to gain momentum across our industry. We are taking action, by accelerating our approach to decarbonisation through low-emissions technology and creating innovative and sustainable solutions. We are playing our role to advance a safer and more sustainable industry and society.
"We continued to deliver on our sustainability commitments, reducing scope 1 and 2 greenhouse gas emissions by 14 per cent on the 2019 baseline, and we remain on track to achieve our target of reducing scope 1 and 2 greenhouse gas emissions by at least 40 per cent by 2030. This year, we also announced our commitment to source 100 per cent renewable electricity by 2040 and signed our first Power Purchase Agreement (PPA) with Lightsource bp for renewable electricity. We also converted $1.3 billion of existing bank debt facilities into sustainability-linked loans, aligning our financing strategy with our ESG goals. These, along with other initiatives this year, form part of our roadmap to support our ambition to achieve net zero emissions10 by 2050. ”
Dividend and Capital Management
The Board has declared an unfranked final ordinary dividend of 22.0 cents per share, representing a payout ratio of 53 per cent. This brings the full year dividend to 35.0 cents per share and full year payout ratio of 48 per cent. The dividend is payable to shareholders on 22 December 2022 and shareholders registered as at the close of business on 21 November 2022 will be eligible for the final dividend.
Return on net operating assets, which is a key measure of how efficiently we use our assets, increased from 8.1 per cent in FY2021 to 11.4 per cent in the current financial year. This was driven by our improved earnings performance, a result of executing on the refreshed strategy and current market conditions.
Orica successfully completed an equity raise during the year resulting in gross proceeds of $691 million. After providing for the upfront and deferred cost of the Axis acquisition and associated fees, the remaining proceeds are being used to fund incremental trade working capital requirements and provide balance sheet capacity. The equity raise contributed to the lower gearing at September 2022 of 19.7 per cent 19, which is below the target range of 30 to 40 per cent.
Mr Gandhi said: “Our financial position is prudent in the current volatile external environment. We will continue our disciplined approach to balance sheet and capital management, and we are focused on improving our operating cash generation.”
Outlook
2023 financial year EBIT from continuing operations is expected to increase on the pcp attributable to:
- Anticipated growth in global commodities demand
- Continued commercial discipline
- Increased adoption of advanced technology offerings, and contributions from the newly acquired Axis Mining Technology business
- Inflationary pressures and higher energy costs, as well as supply chain dislocations, will remain an ongoing challenge in the 2023 financial year. Orica will continue to implement cost reduction initiatives to reduce the impact from these pressures
Capital expenditure expected to be within $400 million to $420 million, higher than pcp due to sustainability and sustenance projects; depreciation and amortisation to be in line with the pcp
Continued focus on balance sheet and cash flow optimisation, with gearing expected to remain below the stated range of 30 – 40 per cent
Net finance costs expected to increase on pcp due to higher interest rates, and the effective tax rate to be within the range of 30 – 32 per cent
Going forward we expect the FY2023-FY2025 3-year average RONA to be 10.5 – 13.0 per cent.
Commenting on the 2023 outlook, Mr Gandhi said: “While we have made strong progress this year, we are deeply committed to continually improving performance across all areas of our business.
“We expect the demand for critical minerals to remain strong in the year ahead, and we are well-positioned to navigate ongoing external challenges with the strengths of our global network and culture, while lowering our greenhouse gas emissions.
“Our customer’s appetite for new technology and our refreshed strategy sets us on a clear pathway to drive organic growth from blasting technology and accelerate the adoption of our new technologies and digital solutions from mine-to-mill, growing beyond blasting.
“We are making significant progress towards a simpler, more efficient, and more sustainable organisation. We are committed to accelerating our sustainability agenda, and helping our customers achieve their targets while remaining competitive in a lower-carbon future and delivering value for our shareholders and broader stakeholders."
Market Briefing
Orica will provide a market briefing at 11:00am (AEDT), 9 November 2022. A webcast of the briefing will be available at https://edge.media-server.com/mmc/p/7guqxuse
Analysts Contact
Delphine Cassidy
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Mobile +61 419 163 467
Media Contact
Andrew Valler
Head of Communications
Phone +61 3 9665 7512
Mobile +61 437 829 211
