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Outsourcing part of new Orica outlook

Orica has announced that its full year net profit fell 37 per cent after a goodwill writedown of the value of its Minova mining and tunneling business.

Minova makes chemical-based consumables, bolts and other products for ground and roof support, ventilation and water control for the underground mining, tunnelling and civil construction markets.

Chemicals and explosives maker Orica?s net for the year to 30 June, 2012 fell to $402.8 million, from $642.3m and included a $247m loss first flagged by the company relating to the impairment charge.

However, Orica expects its group net profit after tax in 2013 to be higher than that reported in 2012, subject to global economic conditions.

Operating earnings in the mining explosives business edged back three per cent due to the temporary closure of Orica?s Kooragang Island facility due to chemical leaks.

“Higher demand in mining markets in Australia, Asia and Latin America and improved pricing mostly offset the adverse earnings impact arising from incidents at Kooragang Island and foreign exchange movements,” Orica said in a statement.

The company recently completed an organisational restructure to improve customer service and accountability. Process improvement studies have commenced within manufacturing, with significant cost and efficiency opportunities identified.

Orica CEO Ian Smith said the company?s focus would be on outsourcing wherever possible to offer the greatest flexibility to Orica?s customers in the mining industry.

?Orica’s strategy is based on a secure, flexible, low cost supply chain,? Orica?s acting group manager for corporate communications Ben Wilson told Quarry.

?This means Orica is able to draw on a range of supply sources, depending on customer requirements and other market factors.

?These supply sources will include Orica’s own production plants, joint ventures and external suppliers where that provides the best option for the customer and Orica.

?The benefit to customers comes from Orica ensuring that it is always able to meet its customers’ requirements for a flexible and secure supply of important production inputs.?

Wilson said that these sourcing options would be considered routinely as part of Orica’s business going forward.

Sources: Orica, The Australian, Leading Company

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