Orica has reported its first fall in underlying profit since 2001 and this is one of the decisions behind the possible sale of its Chemical division.
Orica's Chemical business is worth around $500 and delivered earnings of $92 million before interest and tax. It manufactures products used in paint, plastics and agricultural products.
Through its Bronson & Jacobs brand, Orica also supplies chemicals used in food, cosmetics and medicine. This brand was acquired in 2004.
Orica's Marplex brand manufactures plastic products used by white-goods and auto manufacturers. This is likely to be impacted with Holden and Ford deciding to stop making cars in Australia by 2017.
At the AGM held January 30, Orica Chairman, PJB Duncan, noted: "Our non-mining Chemicals business finished the year down 8% on prior years, feeling the ill effects of the well publicised pressures facing the manufacturing and industrial sectors in Australia and New Zealand. A strategic review of this business is in train."
Orica CEO Ian Smith said while the chemical division was tasked with jobs such as plastic casing for the national broadband network, its future was unclear due to the structural change hitting Australia’s manufacturing sector, reports Financial Review.
Last year, Smith had called on the government to do more to help manufacturers struggling with rising costs and the high exchange rate.
In 2010, Orica demerged DuluxGroup and the split was seen as positive for both companies as it allowed Orica to focus on the provision of services to the mining, construction and infrastructure industries.
Outgoing chariman Duncan noted: "It is with some disappointment that I report this profit outcome . . . This is in part a reflection of the costs associated with our ground support business – previously Minova."