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Orica’s results spark enthusiasm

Investors showed increased enthusiasm for Orica (ASX:ORI), the explosives and chemicals group, following the release of its 2022-23 results on Thursday. The highlight was a 23% boost to dividends.

Orica’s shares performed well in the early session after the results were released, despite a broader market downturn.

The company reported a 12% increase in sales for the year, reaching $A7.945 billion, outpacing inflation. This resulted in a 24% rise in EBIT to $698 million.

Net profit after tax also grew by 16% to $369 million, and the company anticipates a similar performance in 2024.

The final dividend was set at 25 cents per share, up from 22 cents the previous year, bringing the full-year distribution to shareholders to 43 cents per share, up from 35 cents.

Orica attributed its underlying EBIT growth to volume expansion, increased utilisation of manufacturing plants, improved results from customer and supply contracts, and greater earnings from digital technology offerings. However, these gains were partially offset by a weak result from Mining Chemicals, mainly due to a planned cyanide plant turnaround.

CEO Sanjeev Gandhi stated, “We delivered another strong performance for the full year with a 24% growth in underlying earnings from continuing operations. Our team remains committed to executing our strategy, focusing on the quality of earnings.”

Gandhi continued, “Ongoing commercial discipline and strong customer demand for our products and services have driven our performance this year, along with increased adoption and earnings from blasting and digital technologies as customers seek productivity gains and support in achieving their sustainability goals.”

Looking ahead to 2024, Orica expects higher EBIT compared to 2023-24. However, the company cautioned that earnings in 2023-24 will be more skewed toward the second half due to a heavy planned turnaround schedule, especially at its ammonia plant in Newcastle, in the first half, and normal seasonality.

Orica believes that 2024’s performance will be underpinned by strong demand for its products and services driven by anticipated global commodities growth and increased adoption of blasting and digital technology offerings. Further benefits from commercial discipline are also expected.

In a longer-term outlook, the company advised that the next three years are expected to deliver a 3-year average Return on Net Assets (RONA) in the range of 12% to 14%, up from its previous range of 10.5% to 13%.

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