Orica sees growth into 2022 as miners recover from ‘perfect storm’

Orica, the nation’s biggest commercial explosives maker, is projecting strong mining activity to persist into 2022 as the sector rebounds from a torrid year, in which geopolitical tensions and the COVID-19 pandemic brought parts of the industry to a halt.

Melbourne-based Orica on Thursday revealed it had sunk to a net loss of $174 million for the year to September 30, which chief executive Sanjeev Gandhi attributed to a “perfect storm of adverse factors” that smashed the company and its customers in the mining sector all at once.

In the past 12 months, pandemic-related disruptions in much of the world forced mines to close or curtail output. Souring diplomatic relations between Canberra and Beijing led to China banning cargoes of Australian coal. Raw ingredients and freight costs increased, while foreign-exchange rates moved unfavourably for the business.

Orica’s underlying earnings before interest and tax fell 30 per cent to $427 million. Its shares fell 3.6 per cent on Thursday to end the session at $14.72.

However, mining activity has picked up markedly this year with prices for many commodities including coal rallying on the back of a sharper-than-expected post-COVID global economic recovery colliding with acute supply shortages.

Mr Gandhi said the improving market conditions had driven a “significantly improved” second-half result.

“What’s promising is I expect this momentum is going to continue into the first half of next year as well,” he said. “[The] global commodity outlook is pretty good in terms of demand, pricing is still attractive for most commodities and, on top of that, stimulus packages are coming.”

‘We are the leading blasting services provider in the world. We would like to expand our offerings to become the leading mining services provider in the world.’

Orica CEO Sanjeev Gandhi

Also on Thursday, Orica unveiled a strategy update to investors under which the company intends to expand digital monitoring offers, increase its focus on customers in the quarrying and construction industries, attract new customers in key Asian markets and expand its reach into “future-facing” commodities such as electric battery materials lithium, nickel and cobalt that will be increasingly needed to power the clean-energy age.