(Adds CEO comment, detail)
By Melanie Burton
MELBOURNE, Nov 2 (Reuters) - Australia's Orica Ltd ORI.AX , the world's top supplier of commercial explosives, logged a drop in annual profit on Friday, but shares jumped on the back of a second-half turnaround after operational issues at Burrup plant dented its first-half profit.
The company is expecting a steady fiscal 2019 as new contracts and an improved global economic outlook help drive growth, particularly in the Australia Pacific and North American regions, Chief Executive Alberto Calderon said.
"For us, FY 19 is a year of stabilisation ... But the prospects for 2020, 2021 look good," Calderon told Reuters.
Shares closed 6.4 percent firmer at $17.72 after hitting the highest in more than three months after net income surged 62 percent in the second half compared with the first half of the year.
Calderon said that overall contract growth was buttressed by the company's new digital and automation services to miners while China's crackdown on pollution, which has driven the import demand for high quality coal also helped its North American business.
Orica's bottom line was also boosted by a move by some miners into lower grade ore. Since commodities prices have recovered from the 2016 nadir, miners have "relaxed" a little and are no longer focused on high grade production. Mining lower grades requires more blasting services.
Underlying profit, a measure of earnings that excludes one-off gains and losses, dropped to A$324.2 million ($233.55 million) for the year ended Sept. 30 from A$386.2 million a year ago.
The company declared a final dividend of 31.5 Australian cents per share, up from the 28 cents per share a year earlier.
Orica said in May it was investigating premature cracking at its newly minted Burrup ammonium nitrate facility in Western Australia that it built with Norwegian partner Yara International.
It needs to replace some key components and does now not expect to reach nameplate capacity until the first half of FY20.
Total ammonium nitrate volumes were up 5 percent year-on-year, helped by higher demand in Indonesia and Australia.
However, volume growth was offset by unfavourable contract pricing, Orica said, adding that earnings before interest and taxes (EBIT) were further affected by unplanned maintenance shutdowns at Yarwun and Kooragang Island operations in Australia.
The impact of contract pricing for the year was lower than previously expected due to the deferral of some contract re-negotiations to the 2019 financial year, the company added.
Orica expects to see strong growth across all regions except for Latin America, where it has restructured its business after losing several large contracts. However, it won a large contract in Peru and is talks with mining exploration hot spot Ecuador for potential work there, Calderon added.
($1 = 1.3881 Australian dollars)