Orica Ltd., the world’s largest supplier of explosives to miners, fell to the lowest in six years after flagging writedowns and less profits than analysts forecast.
Challenging conditions in the mining sector and an oversupplied ammonium nitrate market will result in impairment charges on property, plant, and businesses in the range of A$1.35 billion ($995 million) to A$1.65 billion, Orica said in a statement. It expects full-year profit after tax 10 percent to 15 percent below A$490 million, the mean of broker estimates.
A commodities rout has driven prices to their weakest levels in 13 years as China’s economy expands at the slowest pace since 1990 and the Federal Reserve moves closer to raising borrowing costs. Orica expects fiscal 2016 earnings to be in line with this year barring further deterioration in global economic or mining conditions.
“Orica is only now fronting up to the reality of the weak conditions its business and the broader mining services sector faces,” Morgan Stanley analysts Nicholas Robison and Vivienne Lee, said Friday in a note to clients.
Orica fell as much as 17 percent to A$15.58, the lowest since May 1, 2009, and was at A$15.66 at 12:11 p.m. in Sydney, heading for the biggest daily drop since July 28, 2008.
“Action is needed on the elements of our business that are not working as well as we would like,” Chief Executive Officer Alberto Calderon said in the statement. The Melbourne-based company will also review its share buy back which began March 2.