Orica's shares have taken a pummelling and could be set for more punishment after the explosives maker shocked investors with a profit downgrade and an asset writedown of up to $1.65 billion.
The company had been anticipating a full year profit of about $490 million, already 20 per cent down on 2013/14, but now expects it will fall short of expectations by between 10 and 15 per cent due to the downturn in the mining sector.
Orica shares tumbled as much as 17.5 per cent to values not seen since 2009, and CMC Markets strategist Michael McCarthy said there could be more pain as the bad news sinks in.
"It's nasty. Orica shares had been holding up reasonably well despite the downturn in the mining services sector but today all the chickens seemed to come home to roost," Mr McCarthy said.
"Not only did we have big writedowns but we've also got a miss on earnings and a very disappointing outlook.
"Given the way that up until now Orica's earnings had appeared to defy gravity, it's come as quite a shock to the market."
The shares closed at $15.64, a fall of $3.19, or 16.9 per cent.
Orica chief executive Alberto Calderon, who stepped into the role in March, said lower than expected sodium cyanide production due to a glut in the market increased environmental provisions, and reduced asset sales had knocked the outlook.
The company said results in 2015/16 would be in line Orica's previous forecasts, but only if the mining sector does not further deteriorate.
Orica announced 700 job cuts in November when it reported a $603 million annual profit, and in July said 29 of 220 workers at its Yarwun site in Queensland would lose their jobs.
Mr Calderon said Orica was now in a stronger long term position, but "action is needed on the elements of our business that are not working as well as we would like".
"Market conditions remain extremely challenging and in this environment there is an increased need to further reduce costs and increase efficiency. The business review has been the first step in this process," Mr Calderon said.
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