Orica slips despite unveiling share buyback
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More news: Shares in Orica are down 1.8% to $16.60, even as the chemicals and explosives maker unveiled a $400 million on-market share buyback, days after flagging stronger than expected first half earnings.
RBC Capital Markets analyst Owen Birrell said the key operational focus of the company's investor day presentation was on delivering 50% of earnings from 'Beyond Blasting' through growth in digital solutions and specialty mining chemicals.
"In simple terms this implies a ~5x increase in the current (FY24) contribution all else equal...the market does not have this degree of earnings growth in its current numbers over the 'mid-term', so the messaging today will be critical to see if the market gains confidence in the ability of ORI to executive and deliver."
On capital management, Orica's revised strategy to return excess capital either by on-market buybacks or special dividends is welcome, albeit somewhat expected, he said.
"If ORI is able to execute and deliver the aforementioned growth aspirations, over the next couple of years we expect ORI to exhibit improving ROIC, free cashflow and therefore ongoing capital management."
Orica unveils $400m share buyback after profit upgrade
The news: Chemicals and explosives maker Orica has outlined an on-market share buyback, days after flagging stronger than expected first half earnings.
The numbers: The company said it would buy back up to $400 million of its shares over the next 12 months starting 28 March. It also committed to maintaining an investment credit grade rating with a leverage target range of 1.25x to 2x, and a dividend payout ratio target of 40% to 70% of underlying earnings.
The context: CEO Sanjeev Gandhi said Orica has continued to deliver consistent profitable growth and improved cashflows, and the share buyback is aligned with its refreshed capital management framework. The announcement comes a week after the company said it expects stronger than expected earnings before interest and tax (EBIT) for the first half, but also outlined after-tax writedowns worth up to $350 million related to impairments and restructuring at its Latin American and EMEA businesses.
The source: ASX
