The decision was made after giving consideration to spinning off the chemicals division into a separate entity listed on the Australian Securities Exchange.
Earnings before interest and tax for its chemicals business contributed $67 million, down 29% on the previous year, which Orica attributed to expenses associated with restructuring and repositioning costs in Latin America.
However, Orica said the business has been positioned for an expected recovery in volumes in general chemicals and improved performance in Latin America.
Full year 2014 net profit after tax was $602.5 million – up 2% and in line with guidance – as proof of its resilience in the face of “challenging market conditions”, but it came at the cost of jobs.
Orica, which supplies explosives services for the oil and gas and mining industries, has cut 1300 jobs over the past two years and said its ongoing transformation program would lead to a further cut of about 700 positions next year.
Together with other efficiency measures, including a procurement efficiency program, this could result in pre-tax financial benefits of $140-170 million next year and a further $60-80 million in 2016. Pre-tax implementation costs of about $100-120 million could be incurred in 2015 and further costs of $20-40 million in 2016.
“The transformation program will further improve Orica's resilience in the face of continuing volatility and uncertainty, with the net benefits providing flexibility in how the company positions itself across its diverse markets and customer base,” the company said.
Orica said EBIT of $930 million, 4% below the prior corresponding period, reflected continuing pressure on volume and pricing in mining services markets and reduced chemicals EBIT and includes foreign currency benefits of $24 million and profits from asset sales of $23 million.
“Orica’s diverse geographic footprint and commodity exposure, strategic focus on differentiated products and services, and the initial results of the transformation program have largely offset the impact of lower volumes and prices in some markets,” Orica CEO Ian Smith said.
Its overall global explosive volumes across the year were down 1%, which the company put down to reduce coal market demand in eastern Australia, North America and Indonesia.
While continued volatility and uncertainty in global resources markets made it difficult to provide profit guidance for the year ahead, Orica said it did not expect an improvement in the resources markets, “reinforcing the requirement for the company to achieve its transformation objectives”.
It reported positive explosives volume growth in the Pilbara iron ore region, the emerging mining markets in Africa, Commonwealth of Independent States and in the European quarry and construction sector.
