Slide 1: 2010 Full Year Results Announcement
For personal use only 2010 Full Year Results Announcement 8 November 2010
Slide 2: Presentation outline
Presentation outline For personal use only Group performance Graeme Liebelt Divisional performance Noel Meehan Balance Sheet & Cashflow Noel Meehan Strategic priorities Graeme Liebelt Outlook Graeme Liebelt Orica Full Year Results 2010 Page 1
Slide 3: Group financial performance
Group financial performance Full year ended 30 September (A$M) 2010 2009 % (11.8) For personal use only Sales 6,539.3 7,411.0 Gross margin 3,054.4 3,181.8 (4.0) EBITDA 1 1,340.9 1,330.2 0.8 EBIT 1 1,101.4 1,082.5 1.7 EBIT from continuing operations 1,009.0 953.6 5.8 Net profit after tax p
Slide 4: Group safety performance
Group safety performance For personal use only Full Year Full Year 2010 2009 AWRCR1 0.73 0.69 Recordable cases 161 146 Distribution incidents 27 43 Fatalities - 4 1 All Worker Recordable Case Rate is calculated as the number of injuries and illnesses per 200,000 hours worked. Orica Full Year Results
Slide 5: Sustainability
Sustainability For personal use only Achievement versus 2004 Challenge 2010 baseline % improvement Targets Energy consumption 17% Greenhouse gas emissions 51% Water consumption 35% Waste generation 69% Challenge 2010 targets achieved Orica Full Year Results 2010 Page 4
Slide 6: Divisional Performance and Capital Management
For personal use only Divisional Performance and Capital Management
Slide 7: Group EBIT from continuing operations
Group EBIT from continuing operations EBIT 6% For personal use only $M 1200 1180 1160 15 (75) 1140 44 1120 1100 64 1080 (45) 1060 1040 66 (17) 4 1,009 1020 1000 980 954 960 940 920 900 FY09 EBIT Margin Productivity / Net Volume US Steel FX Costs Change Ammonia Lag Corporate & FY10 EBIT Improvement
Slide 8: EBIT growth by business
EBIT growth by business Mining Services Minova 900 25% For personal use only 160 20% 800 140 700 20% 16% 120 EBIT MARGIN 600 EBIT MARGIN EBIT A$M 15% EBIT A$M 100 12% 500 400 80 10% 8% 300 60 200 5% 40 4% 100 20 0 0% 0 0% 2007 2008 2009 2010 2007 2008 2009 2010 1st Half EBIT 2nd Half EBIT EBIT Margi
Slide 9: Orica Mining Services EBIT
Orica Mining Services EBIT 4% Sales $3,611M; EBIT $768M; Average Operating Net Assets $2,674M For personal use only 900 12 (49) 51 850 79 (36) 800 (17) (9) 768 737 750 700 650 600 550 500 $M FY09 EBIT Net Price Productivity Volume FX Fixed Ammonia Assoc FY10 EBIT Costs/Depn Lag Income /Other Fav
Slide 10: Minova EBIT
Minova EBIT 2% Sales $836M; EBIT $147M; Average Operating Net Assets $1,610M For personal use only $M 200 190 7 (15) 180 11 (16) 170 15 160 150 145 147 140 130 120 110 100 FY09 EBIT US Steel Synergies China FX Volume / FY10 EBIT Price Growth Price Non-recurrence of prior period under- Unfavour
Slide 11: Chemicals EBIT
Chemicals EBIT 10% Sales $1,427M; EBIT $188M; Average Operating Net Assets $788M For personal use only $M 220 5 2 (12) 210 13 (10) 200 20 188 190 180 170 170 160 150 140 130 120 FY09 EBIT General Mining Watercare Synergies FX Caustic FY10 EBIT Chemicals Chemicals Steady recovery in industrial, a
Slide 12: Corporate centre and other support services
Corporate centre and other support services For personal use only Full year ended 30 September (A$M) 2010 2009 $ Corporate centre costs (42.4) (41.1) (1.3) Other support costs (51.6) (57.3) 5.7 Total costs (94.0) (98.4) 4.4 Orica Full Year Results 2010 Page 11
Slide 13: Cashflow
Cashflow Full year ended 30 September (A$M) 2010 2009 $ For personal use only EBITDA 1,340.8 1,330.2 10.6 Net interest paid (136.6) (136.5) (0.1) Net tax paid (237.2) (235.4) (1.8) Trade working capital movement 54.4 104.3 (49.9) Non trade working capital movement (34.4) 2.7 (37.1) FX mvt
Slide 14: Rolling TWC to Rolling Sales
Rolling TWC to Rolling Sales % For personal use only 20.0% 19.0% 18.0% 17.0% Rolling TWC / Sales % 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% HY03 FY03 HY04 FY04 HY05 FY05 HY06 FY06 HY07 FY07 HY08 FY08 HY09 FY09 HY10 FY10 (1) Progress continues on management of TWC 1 Excluding DuluxGroup (DLX). Orica
Slide 15: Capital investment (excluding M&A)
Capital investment (excluding M&A) Planned 2011 capital expenditure FCT 2010 ACT 2010 FCT 2011 For personal use only Major expansion capital projects >A$10M: M ining Services Bontang Nanling 440 249 375 Kooragang Island ammonia plant uprate Hunter Valley emulsion plant M inova China Chemicals plant
Slide 16: Capital management – key measures
Capital management – key measures For personal use only Full year ended 30 September 2010 2009 Net Debt (A$M) 1,051.6 1,094.5 Net Interest Expense (A$M) 127.6 133.5 Interest Cover (times) 7.5 7.8 Operating Cash ($) 803.7 854.9 Cash Conversion 1 (%) 89.7% 95.9% Rolling TWC to Rolling Sales2 (%) 13.0
Slide 17: Drawn Debt Maturity Profile
Drawn Debt Maturity Profile Post 2010 USPP * For personal use only A$M 700 600 500 400 300 200 100 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2022 2025 2030 Average tenor on drawn debt* of 7.7 years * Represents drawn debt as at 30 September excluding the repayment of maturing USPP notes bu
Slide 18: 2011 Hedging
2011 Hedging Major EBIT currency hedges include: For personal use only Effective Effective Currency Exposures % Hedged Hedge Rate • AUD/USD 84% 0.9693 • AUD/CNY 45% 6.5000 • AUD/NZD 84% 1.3079 • AUD/SEK 84% 6.5370 EBIT currency hedging for 2011 has been undertaken using options at a cost of $9.0M Ap
Slide 19: Environmental provisions
Environmental provisions1 Environmental Spend (A$M) ACT 2010 FCT 2011 FCT 2012 FCT 2013 For personal use only Major environmental spend: Botany Groundwater remediation 14.7 10.0 10.0 10.0 HCB remediation 15.8 60.0 31.0 10.0 Botany mercury remediation 1.2 44.8 - - Other 7.3 30.1 29.4 11.0 Total envir
Slide 20: Strategic Growth Priorities
For personal use only Strategic Growth Priorities
Slide 21: Orica's business evolution
Orica’s business evolution Major acquisitions, investments and divestments of non-core assets For personal use only have sharpened Orica’s focus on the mining services sector Acquisitions Dyno Black and Minova Excel Samex Bontang Nanling Ruichy investments Nobel Explosives 2006 2007 2008 2009 2010
Slide 22: Orica's earnings mix – a mining focus
Orica’s earnings mix – a mining focus Orica’s portfolio is now predominantly focused on mining services For personal use only sectors EBIT 2005 EBIT 2010 * Other Non- Mining DuluxGroup 10% 15% Mining 53% Other Non- Mining 32% Mining 90% * EBIT (excluding individually material items) for Orica excl
Slide 23: Orica's business strategy
Orica’s business strategy > Capitalise on and extend global leadership in the provision of high service, critical consumables to the mining and infrastructure markets > Focussed on attractive segments of the mining value chain ae sie) wn mer) ro) a eet yD) ORICA > Leveraged to increases in productio
Slide 24: Industry characteristics
Industry characteristics Attractive industry structure – considerable consolidation For personal use only over the last decade High growth in commodity volumes, driven by industrialisation and urbanisation Declining ore grades and increasing strip ratios Strong growth in tunnelling Mine sa
Slide 25: Urbanisation in China a strong driver of commodity growth
Urbanisation in China a strong driver of commodity growth For personal use only Urbanisation rate for selected countries Percent Tiered city structure – 2005 1 2 3 Tiered city structure – 2025 1 2 3 •Tier 1 city defined as registered population >4.5 m and GDP/capita >USD3,000, •Tier 2 city defined a
Slide 26: Strong growth in global commodity volumes
Strong growth in global commodity volumes For personal use only 10.0% Volumne growth % CAGR 9.0% 8.0% 7.0% 6.0% 6.0% 5.2% 5.0% 5.0% 4.3% 4.0% 4.0% 3.0% 2.0% 1.1% 1.0% 0.0% Thermal Coal Metallurgical Iron Ore Copper Other Base Gold Coal Metal Above average GDP growth forecast for most commodities Sou
Slide 27: Tunnelling and infrastructure
Tunnelling and infrastructure For personal use only Of the ~1,070 km/year of planned global tunnels for the next 15 years ~37% will be constructed in China, which equates to ~6,000km of road and rail tunnels Other national projects require major tunnelling and underground construction, including
Slide 28: Strip ratios and ore grade
Strip ratios and ore grade Consumption of Orica products is impacted by volume of material For personal use only moved not volume of commodity extracted Trend to higher strip ratios and lower ore grades will drive growth higher than growth in underlying commodities The growth rate in global gold
Slide 29: AN growth versus mine output - Australia
AN growth versus mine output - Australia For personal use only AN Demand versus Mine Output * (Base = 100) 1200 CAGR 8% 1000 800 600 AN Demand Mine Output 400 CAGR 4% 200 0 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 Higher growth in AN demand * In
Slide 30: Multiple avenues for growth
Multiple avenues for growth For personal use only 1. Expansion in manufacturing AN expansion – Indonesia and Kooragang Island Initiating systems - China Sodium cyanide expansion - Yarwun Resin and bolt capacity expansion Future AN opportunities – LATAM and Yarwun 2. Geographic expansion
Slide 31: Technology and innovation – a competitive edge
Technology and innovation – a competitive edge Research & development investment 7-8 For personal use only times other industry players Technology leadership supported by extensive research partnerships and alliances Next generation initiating systems – revolutionary wireless boosters Next g
Slide 32: Summary
Summary For personal use only Strong result from disciplined cash and cost management Significant long-term growth opportunities, leveraged to: High growth in commodity volumes, driven by industrialisation and urbanisation Declining ore grades and increasing strip ratios Strong growth in t
Slide 33: Outlook
Outlook For personal use only We expect Group net profit after tax (pre individually material items) in 2011 to be higher than that reported in 2010, on a comparable basis, subject to the rate of global economic recovery and extent of further adverse movements in exchange rates. Orica Full Year Resu
Slide 34: Supplementary Information
For personal use only Supplementary Information
Slide 35: EBIT contribution by business platform excluding DuluxGroup
EBIT contribution by business platform excluding DuluxGroup 1 For personal use only September 2009 September 2010 Chemicals Chemicals Group 16.2% Group 17.0% Minova Minova 13.8% 13.4% Mining Mining Services Services 70.0% 69.6% 1 Excludes corporate costs Orica Full Year Results 2010 Page 34
Slide 36: EBIT contribution by geography
EBIT contribution by geography For personal use only September 2009 September 2010 Other Europe 1.1% Other 13.3% Europe 1.4% 12.7% Latin America Australia Australia Latin 37.7% 11.7% America 43.2% 13.6% North America North 17.2% New New Asia America Zealand 17.9% Asia Zealand 9.2% 4.3% 3.2% 13.5% Or
Slide 37: Gross sales by geography
Gross sales by geography For personal use only September 2009 September 2010 Other Other Europe Europe 1.4% 1.1% 11.2% 11.4% Latin Latin Australia America America Australia 40.3% 13.6% 13.7% 39.9% North North America America 17.7% New Zealand 18.1% New Zealand Asia Asia 4.6% 5.2% 11.6% 10.2% Orica F
Slide 38: Gross margin growth
Gross margin growth For personal use only A$M 3,500 +10.7% -4.0% +16.2% 3,000 +16.4% 2,500 +7.6% +13.9% +4.3% 2,000 +0.1% 1,500 1,000 500 2002 2003 2004 2005 2006 2007 2008 2009 2010 Compound average growth rate since 2002 is 7.9% Orica Full Year Results 2010 Page 37
Slide 39: Productivity
Productivity 1 For personal use only 80% 78.9% 78% 76% 75.1% 74.0% 74% 73.2% 72.8% 72% 69.8% 70% 69.0% 68.5% 68% 66.9% 66% 64% 62% 60% 2002 2003 2004 2005 2006 2007 2008 2009 2010 Continuous improvement in productivity 1 Productivity is measured as fixed costs (incl depreciation and amortisation) as
Slide 40: Net profit after tax
Net profit after tax 1 For personal use only A$M 700 +4.6% +12.9% 600 +15.0% +30.9% 500 +11.8% 400 +20.5% +4.4% 300 +13.0% 200 100 2002 2003 2004 2005 2006 2007 2008 2009 2010 Compound average growth rate since 2002 is 13.9% 1 Pre individually material items. Orica Full Year Results 2010 Page 39
Slide 41: Orica Mining Services
Orica Mining Services For personal use only Full year ended 30 September (A$M) 2010 2009 % Sales 3,610.7 4,057.8 (11.0) EBITDA 918.9 888.6 3.4 EBITDA margin (%) 25.4% 21.9% 16.0 EBIT 767.7 736.5 4.2 EBIT margin (%) 21.3% 18.2% 17.0 Orica Full Year Results 2010 Page 40
Slide 42: Orica Mining Services by geography
Orica Mining Services by geography Australia/Asia North America 500 30% 140 15% For personal use only 450 120 400 25% EBIT MARGIN 100 EBIT MARGIN 350 20% 10% EBIT A$M EBIT A$M 300 80 250 15% 200 60 10% 5% 150 40 100 5% 20 50 0 0% 0 0% 2007 2008 2009 2010 2007 2008 2009 2010 1st Half EBIT 2nd Half EB
Slide 43: Minova
Minova For personal use only Full year ended 30 September (A$M) 2010 2009 % Sales 835.5 940.9 (11.2) EBITDA 177.8 181.1 (1.8) EBITDA margin (%) 21.3% 19.2% 10.9 EBIT 147.3 145.1 1.5 EBIT margin (%) 17.6% 15.4% 14.3 Orica Full Year Results 2010 Page 42
Slide 44: Acquired Minova business – integration
Acquired Minova business – integration 2010 Cumulative Integration cost category (A$M) For personal use only Actual Actual Integration costs 0.9 5.4 Synergy implementation costs 6.8 17.1 Redundancies 1.4 4.1 Transitional salaries/other 3.2 7.4 Total integration costs 12.3 34.0 Project office costs -
Slide 45: Chemicals
Chemicals For personal use only Full year ended 30 September (A$M) 2010 2009 % Sales 1,427.4 1,548.3 (7.8) EBITDA 224.0 204.2 9.7 EBITDA margin (%) 15.7% 13.2% 18.9 EBIT 188.0 170.4 10.3 EBIT margin (%) 13.2% 11.0% 20.0 Orica Full Year Results 2010 Page 44
Slide 46: Cash Conversion
Cash Conversion For personal use only Full year ended 30 September (A$M) 2010 2009 EBITDA 1,340.8 1,330.2 TWC movement 54.4 104.3 Sustenance (192.3) (159.2) Cash Conversion 1,202.9 1,275.3 Cash Conversion % 89.7% 95.9% Orica Full Year Results 2010 Page 45
Slide 47: Foreign Currency Exposure
Foreign Currency Exposure For personal use only Transactional Translational Approx. 60% of 2011 Group EBIT is “Natural hedges” are identified and expected to be from offshore entities exposures are netted Hedging is generally undertaken using bought Residual transactional exposures may be C
Slide 48: Net interest expense
Net interest expense For personal use only Full year ended 30 September (A$M) 2010 2009 $ Net interest expense 128 134 (6) Comprising: Interest on net debt 138 130 8 Add: Unwinding of discount on provisions 6 7 (1) Add: Major external finance leases 3 2 1 Less: Capitalised interest (19) (5)
Slide 49: Impact of Step-Up Preference Securities (SPS) – earnings per share
Impact of Step-Up Preference Securities (SPS) – earnings per share 1 For personal use only Reported per Accounts A$M Net profit for the year 711.9 Less: Net profit attributable to non controlling interests (36.1) After tax distributions to SPS holders 2 (16.2) Adjusted net profit 659.6 Weighted aver
Slide 50: Impact of SPS – gearing
Impact of SPS – gearing (A$M) For personal use only Reported per SPS Accounts Adjusted Current borrowings 187.9 187.9 Non-current borrowings 1,211.0 1,211.0 SPS adjustment 2 - 250.0 Less: Cash (347.3) (347.3) Net Debt 1,051.6 1,301.6 Parent entity equity 1 3,522.7 3,522.7 Minority interests 109.9 10
Slide 51: Impact of SPS – interest cover
Impact of SPS – interest cover (A$M) For personal use only Reported per SPS Accounts Adjusted Financial expense 1 224.1 224.1 Financial income (77.1) (77.1) SPS distribution adjustment 2 - 12.9 Net borrowing costs 147.0 159.9 EBIT 1,101.4 1,101.4 Interest Cover (times) 7.5 6.9 1 Financial expense in
Slide 52: Reconciliation of net profit after tax
Reconciliation of net profit after tax ($M)1 For personal use only 2010 2009 Continuing Discontinued Consolidated Continuing Discontinued Consolidated EBIT 1,009.0 92.4 1,101.4 953.6 128.9 1,082.5 Net financing costs (119.6) (8.0) (127.6) (132.7) (0.8) (133.5) Profit before income tax expense 889.4
Slide 53: Rebased dividends following DuluxGroup demerger
Rebased dividends following DuluxGroup demerger1 For personal use only 2010 2009 1HY 1HY % 2HY 2HY % Full year 1HY 1HY % 2HY 2HY % Full year EBIT EBIT from continuing businesses 431.0 86.9% 578.0 95.5% 1,009.0 408.3 87.0% 545.3 88.9% 953.6 DuluxGroup 64.9 13.1% 27.5 4.5% 92.4 61.1 13.0% 67.8 11.1% 1
Slide 54: Debt Profile
Debt Profile (as at 30 September 2010) For personal use only Drawn Debt Debt Maturity Profile Other, $30M Bank Loans, $279M A$M Drawn Undrawn Total < 1 year 188 575 763 1 – 2 years 292 962 1,254 Export Finance, $95M 2 – 5 years 315 512 827 > 5 years 604 25 629 USPP, $995M Total 1,399 2,074 3,473 Ave
Slide 55: Individually material items after tax and non-controlling interests
Individually material items after tax and non-controlling interests For personal use only Year ended 30 September (A$M) 2010 2009 Mining Services restructure - (24.4) Pharmaceuticals tax case (97.8) - Mercury remediation environmental provision (31.5) - HCB remediation environmental provision (12.7)
Slide 56: Manufacturing Expansion Opportunities
Manufacturing Expansion Opportunities Peru - AN Manufacturing China — Initiating Systems «Working on several options for AN Joint Venture (Orica 51%) with Nanling capacity expansion in Latin America to manufacture specific non-electric Preferred location is Marcona, Peru detonators for the Chinese «
Slide 57: Disclaimer
Disclaimer This presentation has been prepared by Orica Limited. The information contained in this presentation For personal use only is for informational purposes only. The information contained in this presentation is not investment or financial product advice and is not intended to be used as the