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Orica shares tumble as profit downgraded

Shares in explosives and mining industry supplier Orica have tumbled after it said its profit is set to fall by about 10 per cent.

The company has blamed global economic conditions and higher than expected costs in its tunnelling business for a likely drop in net profit for fiscal 2013.

Orica shares fell by 13.4 per cent, or $2.81, to $18.19.

Orica made a net profit of $650.2 million in fiscal 2012, and it now expects its net fiscal 2013 profit will be about 10 per cent lower, or about $585 million.

The drop is blamed in weak market conditions in Europe and North America, plus high costs associated with Orica's ground support business, which provides products and services for tunnelling and underground mining.

This division is now expected to break even, compared with earlier guidance of profit of between $17 million to $25 million.

Orica's Indonesian business is also predicted to yield weaker earnings, because of unexpected production site issues and market conditions.

Weaker global demand for explosives and sodium cyanide are also affecting bulk explosives volumes.

But Orica was optimistic of a turnaround in 2014, as performance issues are addressed in the ground support business and European operations.

"A general review of productivity initiatives and cost reduction opportunities is ongoing across all areas of the Orica business," Orica said.