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Orica sees bottom in quarrying and construction sector

Jul, 22 2009

(Australia)  --  EXPLOSIVES and chemical manufacturer Orica has maintained forecasts for net profit growth this financial year despite a slowdown in demand from the mining sector.

In a speech to investors at a Sydney dinner on Monday, chief executive Graeme Liebelt said the company's mining-focused businesses were continuing to experience "very mixed" conditions.

"The quarry and construction sector is seeing a very low level of activity, but has probably bottomed," he said.

"So far, though, we could not say that we see any signs of a sustainable broad-based recovery, and there is little sign of benefit from the various stimulus packages that have been proposed by governments in response to the economic crisis."

Mr Liebelt said the economic downturn and its impact on the company had been within his expectations, but the turmoil in financial markets was "at the top end of any spectrum I had imagined". The company, which takes September 30 as its end of the financial year, forecast in May that the second half of the year would be tougher than the first, and this was coming to fruition, he said.

There were also a number of sectors, including the US thermal coal market, which Mr Liebelt said may deteriorate further, which would have a negative impact on both the explosives and Minova mining services divisions. "Conditions in other mining segments have been reasonably resilient, including thermal coal in Australia and Asia -- gold and copper generally," he said.

Orica is now forecasting sales of ammonium nitrate, a mining explosive, to fall by 2-3 per cent in the second half by volume, following a flat performance in the first half.

Minova, acquired in 2007, was also on track to generate $25million in cost savings by the end of the financial year, while margins within the new division had improved following a disappointing first half.

By: Blair Speedy





SOURCE: www.theaustralian.news.com.au