Orica cautiously optimistic for 2013-14

Orica (ORI) chairman Peter Duncan has expressed "disappointment" over the group's first fall in underlying profit in 12 years that it posted in fiscal 2013, but maintained a cautious optimism for the year ahead as the chemical company continues to transform its business model.

Orica posted a net profit before materially significant items of $601.6 million in the 12 months to September 2013, a 7.5% decrease on the $650.2 million recorded in the previous corresponding period.

At the group's annual general meeting, Mr Duncan said the poor result was largely affected by $29 million in restructuring costs as a result of integrating ground support into the mining services business.

"While the outlook is more optimistic, I won’t sidestep the reality that this business has so far failed to live up to expectations," Mr Duncan said.

Orica's non-mining chemicals business – which slid 8% in the 12 months to September 30 2013 as a result of manufacturing pressures in Australia – was now undergoing a strategic review, he said.

However Mr Duncan said manufacturing performance was improving in "all areas".

"These outcomes in 2013 were achieved by a business in transition – realigning itself behind a refreshed corporate strategy, a new functional organisation model, and within the context of a changed external environment for Orica’s customers," Mr Duncan said.

"Our strategic focus of extending services and differentiated products to mining customers is delivering encouraging results."

Orica's chief executive officer Ian Smith said last year's one-off cost of integrating ground support into mining services was expected to turn around into a $23 million to $25 million profit in fiscal 2014.

Orica declined to give a specific update on its guidance for 2013-14.