Orica Limited shares fall on shock legal ruling

Orica Limited (ASX:ORI) shares are on the nose.

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The share price of explosives manufacturer Orica Limited (ASX: ORI) is down 2.7% to $15.17 this afternoon after the group announced an adverse ruling on its tax liabilities in the Federal Court.

In a brief statement to the ASX the company admitted that the judge's decision will have an adverse impact on net profit after tax to the tune of around $36 million.

Orica was issued amended tax assessments for the 2004, 2005 and 2006 years and today the court upheld those assessments.

It seems this verdict was not unexpected given investors have largely shrugged it off with the stock down just 2.7% on a day when businesses with exposure to the resources sector have been universally dumped.

Orica's most recent full year net profit was $417 million, which was significantly down on the prior year. The business was also forced to take a non-cash impairment charge of $1,692 million last year as markets for ammonium nitrate continued to remain under pressure during the year.

Given the dim outlook for capital expenditure in the resources space and the challenging market conditions for ammonium nitrate, investors may be better off looking for companies outside this space…

Motley Fool contributor Tom Richardson has no position in any stocks mentioned. You can find Tom on Twitter @tommyr345 Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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