“It can’t do both,” Rayner said. “More gas means more climate pollution and a more dangerous future; it’s that simple.”
Gandhi said, while he liked the government’s “made in Australia” strategy, bringing on new supply would take at least a decade. The greatest challenge facing the country’s heavy manufacturing today was soaring energy costs, including gas, he said.
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“My message is: let’s first protect the present. If you don’t have a manufacturing base, what do you produce in the future? Nothing!” he said.
Other companies, too, are struggling with high manufacturing costs. Global confectionery and food giant Mars recently said its local factories were among its most costly to run, and Wesfarmers late last year took a swipe at gas producers after prices soared from $2 per gigajoule a few years ago to around $12 on today’s spot markets.
Orica’s gas struggles didn’t stop it from reporting a significant jump in half-year profit to $337.5 million, boosted by land sales in Deer Park Victoria. Underlying earnings for the global group were up 10 per cent, driven by technology investments and strong conditions in the mining sector.
“We’ve invested a lot in the past in technology in the digital business. We are now successfully starting to scale that up, and that becomes material. That’s where you see that EBIT and earnings uplift coming through,” Gandhi said.
As well as pressing its advantages in technology – it bedded down two key acquisitions over the half year, absorbing Canadian geospatial software firm Terra Insights and US sodium cyanide manufacturer Cyanco – Orica’s commodities focus has also hit a sweet spot.
Copper, gold and future-facing minerals are in demand. “That’s clearly the area where we are the strongest. We’re playing the sweet spot of the moment, and that translates into better earnings and better shareholder returns for us,” he said.
Gandhi blamed Orica’s gas struggles on the government’s mandatory $12 per gigajoule price cap for domestic sales introduced two years ago, designed to curb the run-up in electricity prices.
The pricing mechanism failed to include gas retailers, and a number of exemptions made it difficult to negotiate gas contracts under the price cap.
“Unfortunately, the $12 which started off as a price cap has now become a floor,” Gandhi said. “I’m just asking to get adequate supply for genuine consumers like Orica and others at the right price.”
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