Reuters reported that Orica Ltd, the world biggest maker of explosives for mines, is looking to grow in China with small acquisitions and also targeting growth in sales to iron ore mines in Western Australia after it spins off its paints arm.
Orica is set to split off its DuluxGroup paints business to shareholders on Friday so it can focus on mining and infrastructure services, which will make up close to 90% of group earnings alongside its chemicals business.
Mr Graeme Liebelt CEO of Orica Ltd said it expects to decide in mid-2011 whether to commit up to AUD 750 million to nearly double capacity at its Kooragang Island ammonium nitrate plant in Australia. Ammonium nitrate is the main ingredient in explosives. The decision to expand to 750,000 tonnes a year will hinge on customers' coal mine expansion plans, but Mr Liebelt said he did not expect customers to cancel planned expansions after Australia watered down a proposed mining tax last week.
He said that "If they go ahead with their plans, and I suspect they will go ahead with the majority of their plans, then we will need to build this plant."
Mr Liebelt said Rival Incitec Pivot Ltd is expanding an ammonium nitrate plant in Queensland, with the new capacity coming on line in 2012 which will force Orica to export around 100,000 tonnes a year of its product in 2012 and 2013. But as coal mine expansions go ahead in Australia, Orica new capacity will be needed, and he said the vast majority of its ammonium nitrate would be sold domestically.
Mr Liebelt is looking to expand sales to iron ore mines, where Orica has a market share of less than 5% globally, with its main target in the Pilbara, Australia's major iron ore belt and some growth possible in South America. He said that "I'd like to see it increase, because iron ore is a sector that's going to be growing strongly going forward."
Mr Liebelt said "In any case I think we would expect a series of relatively small steps, rather than any large acquisition. He did not expect to have to go to shareholders to help pay for any acquisitions unless they were very large.”
He said that "But at this point we anticipate we can finance our growth with our existing balance sheet. Analysts are upbeat about the group's growth prospects following the DuluxGroup spin off with six out of 10 brokers rating the stock a buy or strong buy and no sell recommendations.
Mr Liebelt reaffirmed the group expects its profit to grow this year, but declined to comment on whether analysts' forecasts for net profit growth of 6 percent to AUD 684.9 million for the year to September 2010 would be achievable.
He said that "I don't anticipate needing to go the market with any other guidance."
(Sourced from Reuters)
