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Why Orica Ltd shares are sinking lower today 

mineral, sands, mining

Orica Ltd (ASX: ORI) was among the worst performers in today’s early trade on the ASX200, following the release of an update on the company’s outlook and review of operations – ahead of the half-year results announcement scheduled on May 7. 

The commercial explosives producer forecasted a decline in EBIT for the first half of FY 2018, due to various factors, including: 

  • A non-cash impairment on the underperforming subsidiary Minova and an increase in provisions related to environmental commitments, weighing $300 million on aggregate 
  • Maintenance shutdowns at Yarwun and Kooragang Island plants and construction issues at the Burrup plant, impacting earnings by $17 million and $19 million respectively 
  • Adverse conditions in the cyanide market, where higher input prices and increased competition are driving down the margins. 

On the upside, Orica expects full year sales volumes at the upper end of the guidance provided in November 2017, i.e. some 5% above the 3.65 million tonnes produced in 2017. 

At the time of writing, Orica’s share price is down 3.7% to $17.96. 

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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. 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 Scott Phillips.

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