The Motley Fool

Orica share price lower on $191 million write down news

The Orica Ltd (ASX: ORI) share price has come under pressure on Monday morning.

At the time of writing the commercial explosives provider’s shares are down 1% to $18.81.

Why is the Orica share price in the red?

This morning Orica announced that it expects to recognise approximately $191 million ($134 million after tax) in non-cash adjustments in its FY 2019 first half results announcement scheduled for May 9.

The bulk of this is related to a write down of the Burrup Technical Ammonium Nitrate (TAN) plant, which I doubt will have come as a surprise to the market given its joint venture partner did the same a couple of months ago.

According to the release, rectification works at the TAN plant are progressing in line with expectations. As these rectification and capital works have progressed, the company has identified a number of assets that need to be replaced or repaired.

As a result, the company must recognise the reduced value of plant and equipment that is classified as defective, in line with accounting standards. Orica expects to recognise a non-cash impact of approximately $155 million ($109 million after tax) relating to the TAN plant.

Despite this, management has stressed that it does not affect Orica’s view of the long term commercial and strategic value of the Burrup TAN plant. It believes the plant is an important element of Orica’s domestic supply strategy, being a 30-plus-year asset positioned in the heart of the Pilbara where the strip ratios are expected to grow at a 3%-plus CAGR over the next five years.

And while the plant’s utilisation in FY 2019 will be lower than the previously anticipated 20%, the overall group outlook for the financial year remains unchanged.

The rest of the non-cash adjustment comes from the impairment of IT and other assets. Management advised that as it implements the final stages of its new SAP operating system, $36 million ($25 million after tax) of IT and other assets which are no longer being utilised by the business will be impaired.

Should you invest?

I don’t see a lot of value in Orica’s shares at the current level and would prefer to see them trade notably lower before I’ll consider an investment.

In the meantime, Nufarm Limited (ASX: NUF) shares could be worth a look after their sharp decline over the last 12 months.  As could WorleyParsons Limited (ASX: WOR) shares after its update this morning.

Not keen on Orica, Nufarm, or WorleyParsons? Then these highly rated blue chip shares might be the ones for you to buy.

Our Top 3 Blue Chip Shares for 2019 – NOW AVAILABLE!

You’re invited! For a limited time, The Motley Fool Australia is giving away an urgent new investment report detailing our 3 TOP BLUE CHIP SHARES to own in 2019.

So if you like trustworthy, stable, high-performing companies that pay fat fully franked dividends – we’ve got you covered!

Stock #1 is a beloved old Australian company turning its attention to high-margin businesses... and rapidly returning cash to shareholders with its hefty dividend...

While Stock #2 is an online powerhouse that’s rapidly gaining market share all around the globe... poised for years (or even decades) of tremendous growth...

Even better, Stock #3 offers a whopping 6.5% grossed-up dividend! Which beats the rates on term deposits right out of the water – and offers the potential for capital gains, too.

You can discover all three shares inside our new report right now. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a LIMITED TIME ONLY!


Motley Fool contributor James Mickleboro 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.

One ASX Stock For An Estimated $US22 Billion Marijuana Market

A little-known ASX company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

And make no mistake – it is coming. To the tune of an estimated $US22 billion.

Cannabis legalisation is sweeping over North America, and full legalisation arrived in Canada in October 2018.

Here’s the best part: we think there’s one ASX stock that’s uniquely positioned to profit immensely from this explosive new industry… taking savvy investors along for what could be one heck of a ride.

AND, this is the first time The Motley Fool Australia has EVER put a BUY recommendation on a marijuana stock.

Simply click below to learn more on how you can profit from the coming cannabis boom.

Click here to find out more