Orica Ltd (ASX: ORI) has reported an explosive half year result to 31 March 2019.
Orica is one of the world’s largest providers of commercial explosives and blasting systems. It supplies its products to various industries including mining, quarrying and oil & gas. It is also large supplier of sodium cyanide for gold extraction and it provides ground support for mining and tunnelling. It has been operating since 1874, operates in over 100 countries and has around 11,500 employees.
Orica’s Booming Profit
Orica reported that its revenue grew by a solid 12% to $2.83 billion and EBITDA increased by 15% to $436.8 million (click here to learn what EBITDA means).
Orica had a good period for its sales with higher volumes & services, the introduction of new technologies, favourable foreign exchange movements and higher input commodity prices.
EBIT grew by 20% to $301.1 million (click here to learn what EBIT means) with a strong business performance across all regions and an improvement in manufacturing operations.
Net profit (before significant items) grew 35% to $166.7 million and statutory net profit boomed 114% higher to $32.9 million (from a loss of $229.3 million) which included a $134 million write down of its Burrup related defective assets and the impairment of other assets.
Orica Dividend And Balance Sheet
The Orica Board has increased the interim dividend by 10% to 22 cents per share, although it remains unfranked and represents a payout ratio of 50% of underlying earnings before significant items.
Orica also said that net debt was $1.8 billion at the end of the period and gearing was 38.1%.
Orica Management Comments
Orica Managing Director Alberto Calderon said: “This result demonstrates growing momentum in Orica’s business driven by stronger operating leverage.
“Our performance has been supported by contract wins and growing demand from existing customers in our key Australian and Latin American markets, improved performance in our manufacturing operations and few unplanned maintenance shutdowns.”
Is Orica A Buy?
In the second half of FY19 Orica expects stronger EBIT supported by Ammonium Nitrate volume growth and firm pricing with even better operating performance and efficiency. It was a very solid report with further growth expected.
Orica is certainly doing well, but I don’t have the knowledge to say if Orica is a good buy today or how long its good performance can continue.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.