November 6, 2011 / 11:49 PM / 6 years ago

Australia's Orica upbeat on 2012 outlook

MELBOURNE (Reuters) - Australian explosives maker Orica Ltd (ORI.AX) is optimistic that 2012 will be less challenging than the year just-ended, with strong explosives demand from miners, a milder headwind from currency moves and fewer one-off problems.

The upbeat outlook helped boost Orica’s shares 3.9 percent in a broader market that was down a touch.

Orica reported a 3.8 percent rise in annual profit on Monday, slightly above forecasts, with ammonium nitrate sales having picked up in the second half as mines in eastern Australia recovered from floods.

The company, the world’s largest producer of explosives used in mines and construction, said it expects its profit to grow again in 2012, helped by its new plant in Bontang, Indonesia, which is due to start producing ammonium nitrate in January.

Chief Executive Graeme Liebelt, who will be handing over the reins to former Newcrest Mining (NCM.AX) chief Ian Smith in February, was sanguine about further uncertainty in global conditions in the year ahead.

“Subject to that caveat, I think we go into 2012 with reasonably good momentum,” he told reporters, adding that momentum was “quite strong” in the group’s biggest business, mining services.

“The key thing for us is that China continues to show reasonable growth,” he said.

Rising costs are likely to be the main challenge in 2012, he said.

Orica believes performance at its struggling Minova underground mining chemicals business, hit last year by a price war in North America and weak volumes in China, bottomed in the second half of 2011.

    “We expect Minova to improve year on year -- I don’t think strongly, but at least some improvement,” Liebelt said.

    Orica’s net profit rose to A$642.3 million ($665.3 million) for the year to September from A$619 million a year earlier excluding the Dulux paints business which it spun off in July 2010. That compared with analysts’ forecasts of around A$621 million, according to Thomson Reuters I/B/E/S.

    The mining services business reported 6 percent growth in earnings, held back by floods in Queensland earlier in the year which crimped demand from coal mines. Liebelt said there had been a strong recovery in demand there in the fourth quarter.

    He said Minova, where earnings fell 29 percent, was constantly under review, but there was no deadline for deciding whether to ditch the business that it bought five years ago for A$857 million.

    Orica’s shares last traded up 3.9 percent at A$29.24, adding to its outperformance of the broader market this year.

    Reporting by Sonali Paul; Editing by Ed Davies

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