Earnings before interest, tax, depreciation and amortisation from continuing operations also took a small dent, losing 5% to $472 million.
Sales revenue was flat at $2.8 billion despite Orica recording a 9% growth in its advanced products and services segment and overall selling higher volumes across bulk explosives and cyanide products.
This imbalance was primarily driven by the mining downturn, which forced the average price of explosives and mining chemicals down. Orica said it also faced lower demand for initiating systems and ground support products from coal markets.
Across markets, Orica reported mixed performances with positive results in the Americas, Europe, the Middle East and Africa offset by negative performances in Australia and Asia.
Orica recouped some of these offsets by continuing its company-wide transformation, with savings already evident on its bottom line.
Orica reported a 20% reduction in net debt to $1.8 billion and reduced gearing to 29.4%, versus 36.5% in the previous corresponding period, as well as $79 million of benefits achieved through transformation, although this was offset by one-off costs of $64 million.
The benefits were achieved through the completion of supply contract renegotiations with 60% of Orica’s strategic supplier base, the optimisation of the company’s manufacturing footprint and a reduction of about 550 operational support roles.
Orica also completed the $750 million sale of its chemicals business to funds (advised by Blackstone announced on November 19, 2014) and began an on-market share buyback of up to $400 million.
The share buyback will continue in the second half and will take 12 months to complete.
Orica expects the full year contribution from the transformation process to be in line with initial forecasts of $140-$170 million before implementation costs of $100-$120 million, with a focus to unlock further upside beyond 2015.
Looking forward, Orica CEO Alberto Calderon said completing the transformation and seeking new business would remain Orica’s priority.
“Maintaining our focus on delivering the benefits of transformation to the bottom line is an important priority, as well as finding new opportunities for improvement,” he said.
“Market conditions are unquestionably difficult but Orica is continuing to take action to mitigate the impact of market headwinds to build a foundation for earnings resilience through the cycle.”
Calderon said Orica was continuing to closely monitor the ammonium nitrate supply/demand balance and was evaluating a number of available options to optimise supply.
Meanwhile, the company said global markets volatility made it difficult to provide profit guidance for the 2015 financial year.
For now, the company assumes global explosives volumes to be around 3.75 million tonnes (about 100,000t), with explosives volumes down in Australia and higher volumes in the Americas.
Volumes for the second quarter in Australia are expected to be in line with first.
However, explosives prices have substantially been reset, with Orica expecting the full impact to flow through in 2H15.
The board has declared an unchanged interim dividend of 40c per share payable July 1.
