Yum went the market yesterday after Orica returned to the task of floating off its consumer paint and garden products business, while reporting a reasonably solid interim result for the 2010 financial year.
Investors see a chance to make some money from the first big new float for over a year.
As a result, Orica shares rose $1.03, or almost 4%, to $27.48 as investors saw the chance for some easy capital gains from the spin-off of the DuluxGroup of businesses.
Directors declared an interim dividend of 41c a share (franked to 16c per share), up 3% on the first half payout for last year.
Orica scrapped the spin-off of the consumer products unit, which includes brands such as Dulux paints and Yates garden products, in 2008 as markets fell and the credit crunch took hold, slowing economies and making investors hesitant about new floats.
The company said yesterday the demerger will allow it focus on supplying explosives and chemicals to the mining and construction industries here and offshore.
The spin-off put the 11% pre one-off items rise in earnings in the shade, and made investors forget about the 75% fall in profit after those one-off items.
Excluding individually material items, the company’s after tax profit (NPAT) rose 11% to $293 million, while after those items, it was just over $55 million.
The company earned $220.4 million in the first half of the 2009 financial year.
Revenue fell 19% to $3.226 billion.
Orica managing director, Graeme Liebelt, said in a statement it was a difficult first half.
"We knew the first half would be tough compared with 2009 and that has proven to be the case, with year on year softness in volumes," Mr Liebelt said in the statement.
"But the work we’ve done on the fundamentals in terms of controlling our costs, cash and margins – combined with an ongoing focus on strategic growth priorities has us very well placed to capitalise on the market recovery we see ahead, based on our customers’ plans."
But he was upbeat about the outlook, saying the company was seeing early signs of an upturn in demand in more markets.
DuluxGroup is Australia’s largest manufacturer and supplier of surface coatings, including household paints, and has 12 production sites in Australia, New Zealand, Malaysia, China and Papua New Guinea.
DuxluxGroup had EBIT (earnings before interest tax and depreciation) of $64.9 million in the six months to March 31, or 13% of Orica’s group earnings, according to first-half results yesterday.
Among the details released was the news that the DuluxGroup will have net debt of A$245 million.
Average broker enterprise valuations for DuluxGroup were $1.2 billion to $1.3 billion, according to Orica.
Orica hasn’t ruled out a sale to a trade buyer.
Mr Leibelt said “A demerger is our preferred option, but if somebody came through with an attractive number we would look at it in shareholders’ interests".
