Chemicals and explosives maker Orica expects to cut 700 jobs before the end of the year as a downturn in commodity prices forces its miner customers to cut costs.
Chief executive Ian Smith said the company has so far given the bad news to more than half of the affected workers.
As the world’s largest supplier of explosives and blasting systems to the mining, quarrying and infrastructure sectors, Orica is being adversely affected by plunging commodity prices.
The news came as Orica announced a small rise in annual net profit to $602.5 million, and the sale of its chemicals business for $750 million.
The jobs to go are back office, functional support jobs, removing duplication in roles, Mr Smith said.
Orica has already axed 1,300 jobs in the last two years, and the latest cuts are expected to be the last, he said.
“This is designed to make sure we have true resilience in the face of market challenges and also gives us positioning for growth,” Mr Smith said.
“This process will also allow Orica to capture the benefits of any improvement in the commodity cycle.”
The company’s shares were down 45 cents, or 2.3 per cent, at $18.80 at 1325 AEDT.
Orica’s chemicals business, which currently only contributes seven per cent of overall earnings, is being sold to private equity group Blackstone.
The deal will net between $620 million and $650 million for Orica, which will look at returning extra capital to shareholders once the sale is complete, Mr Smith said.
The company had initially preferred a demerger, but a sale was now seen as providing better value for shareholders.
However Orica will still be liable for any remaining environmental issues and obligations, with the company fined $768,250 this year for chemical leaks at its Kooragang Island and Port Botany plants.
Mr Smith said the company’s earnings performance was positive given challenging market conditions plus lower volumes and prices in some markets.
With explosive volumes down one per cent, the profit was propped up by efficiency improvements that delivered savings of $69 million.
Orica did not provide profit guidance for the current financial year, but said it did not not expect an improvement in the resources sector.
COST CUTTING DELIVERS PROFIT RISE FOR ORICA
- Full year net profit of $602.5m, up 1.7 pct from $592.5m
- Sales revenue of $6.8b, down 1.3 pct from $6.89b
- Final dividend of 56 cents a share, up from 55 cents