Orica Update

Submitted by Craig Strzelecki on 1 May, 2007 - 18:02

Orica has an unchanged Buy broker call and a share price target of $38.20 from sharemarket analyst Citigroup Investment Research. PE bid remains likely: The analyst continues to believe that the take-over of Orica by private equity is likely in the next 6 months. Nothing in today's result swayed the analyst from that view. The $38.20 target price is based on a view of what private equity could pay, and remains unchanged. Solid core result: Orica delivered an EBIT result of $367m, up 33% on last year. The analyst has upgraded our full year EBIT by 4%. 1H EBIT was actually below forecast by 6%, but the analyst misjudged the seasonality in Mining Services. However, the full year forecasts remain broadly unchanged, with the strong earnings growth offset by higher interest expense. Highlights of the result included the Dyno synergy benefits being realised faster than forecast, continued strong growth, and price maintenance in electronic detonators, much stronger-than-forecast profit from Minova's first quarter, and improved market share and price mix for the paint business. Business as usual: Management continue to operate the business as if there had been no private equity bid. While the buyback will be re-started (Orica prepared to pay >$32.00), there was no comment as to potential sale of any non-mining services assets. Indeed, comments in relation to Consumer Products indicated management intends to retain this business.

Orica Limited is listed on the Australian Stock Exchange (ASX) under stock code ORI. You can view their investor website here. ORI was listed on the ASX on 28 November, 1961. Orica is the world's leading supplier of commercial explosives and is also the largest chemical company in Australia and New Zealand. It manufactures and supplies commercial explosives, industrial and specialty chemicals, decorative paints, and plastics. Orica has significant operations in Australia, New Zealand, South East Asia, North and Latin America. Orica Mining Services offers commercial explosives, initiating systems and Blast-Based Services to the mining, quarrying and construction industries. The business is run globally with a presence in Australia, Asia, Europe, the former Soviet Union, Africa, the Middle East, North America and Latin America. Orica Consumer Products is Australia and New Zealand’s leader in decorative, preparation, and lawn and garden care products. The business manufactures and markets icon brands including Dulux, Berger, British Paints, Levene, Walpamur, Cabot’s, Feast Watson, Intergrain, Acratex, Selleys, Rota Cota, Poly, Turtle Wax, Yates, Thrive, Zero and Dynamic Lifter in Australia and New Zealand. Chemnet is Australasia’s leading trading and distribution solutions business, servicing more than 40 key industries. The business is based in Australia and operates in New Zealand, China, Hong Kong, Fiji, Indonesia, Thailand, Malaysia, Singapore, Peru and Chile. Chemical Services is a major supplier of chemicals, services and technology to the water treatment, mining chemical and industrial chemical markets. The business is based in Australia and has operations in the United States and the United Kingdom. Donald Mercer is the Chairman of Orica and Graeme Liebelt is the CEO. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade ORI. Check your charts and good luck with your share trading!

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