MENU

Why Orica Ltd shares were down 7% today

Shares in Orica Ltd (ASX: ORI), the world’s largest provider of commercial explosive for the mining industry, were down 7% in early trade this morning after the company announced a $229 million half year loss.

Here are some highlights from the announcement:

  • The loss announced includes individually significant items such as a $204 million impairment charge for Minova goodwill
  • Previously announced operational issues led to additional sourcing and freight costs
  • Management expect a ‘substantial uplift’ in second half performance
  • The stronger run rate from 2H18 is expected to continue into FY 19
  • An unfranked dividend of 20 cents per share, which represents a 61% payout ratio, was announced

What now?

Despite the poor first half performance, the share market is forward looking and all that matters for investors now is the outlook going forward. Management expect ammonium nitrate volumes to pick up as well as a positive contribution from the recently acquired GroundProbe business.

Foolish Takeaway

It’s not the first time that Orica has faced asset write downs and operational issues which have necessitated a restructuring of the business in the past. There are also additional risks that investors in Orica need to consider particularly given the company’s exposure to the mining sector which is highly cyclical. There is also the threat of slowing demand from China which could heavily impact the business.

One positive for the company is that despite competition from Incitec Pivot Ltd (ASX: IPL) and to a small extent Wesfarmers Ltd (ASX: WES), Orica remains the most dominant player in the explosives market and it’s likely to perform well as long as the resources sector is booming. It also provides shareholders with exposure to the resources sector outside of the traditional big miners BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO).

Our team of experts have identified these top three blue chip stocks to buy in 2018 that could be better picks than Orica Ltd.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can follow Kevin on Twitter @KevinGandiya.

The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!