Predictions of better prices and an improved outlook for chemical shipments have helped lift shares in explosives giant Orica.

December 15, 2017

Orica shares have climbed after the company flagged an improved outlook for chemicals sales and new contracted pricing.

CEO of the the explosives and industrial chemicals maker, Alberto Calderon, told shareholders at the company’s annual general meeting that 2017/18 volumes of ammonium nitrate shipped would be at the upper end of previous forecasts.

Mr Calderon also said that previous losses on contract rollovers were unlikely to be repeated in 2018/19.

Orica had flagged a hit of $50 million to $55 million from losses on contract rollovers in 2017/18 and price resets on contracts in 2016/17.

Mr Calderon said the impact was from the “tail end” of contracts struck when market prices for ammonium nitrate were much higher than they are now.

“Importantly we see no new or unexpected price resets in FY19,” he said.

“We believe that we are close to the end of the known headwinds that we have routinely faced over the last three years.”

Mr Calderon said the company could now start investing for the future.

“We will increase our investment in technology R&D and IT to around $40 million,” he said.

Orica shares closed up 14 cents at $18.16 on Friday, having reached $18.51 during the session.

Orica is the world’s biggest supplier of commercial explosives and is closely tied to the resources industry.

In November, its shares fell to $18.81 – their lowest level since May – when the company warned contract renewals struck at lower prices, following the end of the mining boom, would result in a negative impact on revenues of $50 million to $55 million.