Slide 1: FY2020 Financial Results Presentation
FY2020 FINANCIAL RESULTS PRESENTATION 10 November 2020 Incitec Pivot Limited. ASX Code: IPL
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Incitec Pivot Limited (“IPL”). The information contained in this presentation is for information purposes only. The information contained in this presentation is not investment or financial product advice and is not intended to be used as the basis f
Slide 3: Overview
OVERVIEW Jeanne Johns Managing Director & Chief Executive Officer 3
Slide 4: Zero Harm
Zero Harm Delivered step change in safety performance 1 year ahead of schedule Total Recordable Injury Frequency Rate (TRIFR)1 Potential High Severity Incidents2 0.94 42 0.80 33 34 Target: Target: 0.70 Sustainable 0.57 Improvement Adopted safety FY18 FY19 FY20 FY18 FY19 FY20 protocols to operate con
Slide 5: FY20 Overview
FY20 Overview Resilient result underpinned by technology and manufacturing performance Earnings Before Interest & Tax Operating Cash Flows Net Profit After Tax (EBIT) ex IMIs1 (NPAT) ex IMIs1 $375M $545M $188M 23% on FY19 ($123M incl IMI 19% on FY19) 23% on FY19 31% on FY19 Manufacturing Reliability
Slide 6: Growth Through Supporting Essential Industries
Growth Through Supporting Essential Industries INNOVATION AND HIGHEST QUALITY EXPOSURE TO 94% EBIT1 EXPLOSIVES 6% EBIT 1 COMPETITIVE ADVANTAGE AUSTRALIA’S LARGEST Best premium technology in the market today, ideally suited for growth markets/sectors INTEGRATED SUPPLIER Strategically located assets c
Slide 7: Strong Progress on Strategic Agenda
Strong Progress on Strategic Agenda OUR STRATEGY FY20 SCORECARD Continuous improvement in safety performance TRIFR at 0.57, lowest on record for IPL Drive Manufacturing Excellence Portfolio reliability increased to 86% (pcp: 80%) Phosphate Hill reliability up at 93% (pcp: 75%) and Waggaman reliabili
Slide 8: Significant Potential Upside in Earnings Over Next 3–5 Years
Significant Potential Upside in Earnings Over Next 3 – 5 Years Strong progress in FY20 5 Recovery Fertiliser 4 Manufacturing Excellence Leverage Distribution footprint & commodity price recovery 3 Explosives Growth Opportunity of $40M to $50M3 per annum by FY22 14% growth in domestic 2 Response Plan
Slide 9: Group Financial Results
GROUP FINANCIAL RESULTS Nick Stratford Chief Financial Officer 9
Slide 10: Response Plan
Response Plan Plan on track - delivered on FY20 target $60M • Plan expected to deliver sustained incremental cost savings of $60M1 per annum by FY22 2022 $10M • First phase of Response Plan successfully completed in FY20: ⎯ Delivered $20M of sustainable planned savings $50M ⎯ One-off Response Plan c
Slide 11: Group Result FY20
Group Result FY20 EBIT excl IMIs of A$375M, 23% vs pcp Group EBIT excl IMIs Movements EBIT excl IMIs A$ million Explosives Fertilisers FX & Commodities 600 Net re-contracting 20 (17) 23 (123) 500 (24) 20 (10) (28) 22 13 400 186 (11) 300 200 375 304 100 0 FY19 EBIT Manufacturing COVID-19 US Coal Mark
Slide 12: Profit & Loss
Profit & Loss Summary of IMIs, Corporate Costs, Borrowing Cost and Taxation FY20 FY19 Change Net Borrowing Costs down $8M to $136M IPL Group A$M A$M % • Lower interest cost on refinanced US$ bonds • Lower average debt balance in 2H FY20 compared to pcp Revenue 3,942 3,918 1% following equity raising
Slide 13: Focus on Balance Sheet Strength
Focus on Balance Sheet Strength Balance sheet strong with sufficient liquidity Net debt Net debt substantially lower A$ million 30 Sep 2020 30 Sep 2019 • Proceeds from equity raising applied to repay banking facilities Debt facilities 1,810 2,626 Other borrowings 60 30 • Non-cash movement in fair va
Slide 14: Cash Flows
Cash Flows Improved cash flows underpinned by strong operating performance & working capital outcomes Cash flow EBITDA ex IMIs up 21% vs pcp A$ million FY20 FY19 Change • Stronger operational cash flows underpinned by improved EBITDA ex IMI 731 605 126 business performance Interest paid (136) (131)
Slide 15: Financial Framework
Financial Framework Committed to strong Balance Sheet, disciplined capital management and improving returns Focus on Balance Sheet strength Free cash flow generation Target higher returns • Reduction and maintenance of lower • Strong focus on cost, TWC and • Growth capital investment biased Net debt
Slide 16: Operating Performance
OPERATING PERFORMANCE Jeanne Johns Managing Director & Chief Executive Officer
Slide 17: Summary of Segment Financial Performance
Summary of Segment Financial Performance Diversified operations delivered resilient result in challenging market EBIT1 Change FY20 Performance Commentary A$ million FY20 FY19 % • Structural coal market declines, COVID-19 disruptions of Dyno Nobel Americas 231 234 1% customer operations and lower nit
Slide 18: Americas Explosives
Americas Explosives EBIT of US$121M, 11% vs pcp EBIT of A$181M, 7% vs pcp FY20 Revenue % Split Quarry & Construction by Sector • Volumes down in Q3 due to COVID-19 demand restrictions and following strong 1H B&PM demand 35% • Demand recovery in Q4 driven by stronger residential construction activity
Slide 19: Americas Explosives – Q&C and B&PM End Markets
Americas Explosives – Q&C and B&PM End Markets Dyno premium technology ideal for Q&C and B&PM sectors Quarry & Construction Base & Precious Metals • US infrastructure spending expected to drive aggregates • Iron Ore demand recovering after COVID-19 impact on US vehicle sales demand over medium to lo
Slide 20: Americas Explosives – Coal End Markets
Americas Explosives – Coal End Markets Dyno Nobel well placed to continue servicing Coal markets • Dyno plants strategically located and cost competitive to service Thermal Coal Production By Region – Outlook1 customers in the Powder River & Illinois Basins Mst Powder River Basin • Coal demand expec
Slide 21: Americas Explosives – Growth Opportunity
Americas Explosives – Growth Opportunity Market leader with strong platform for further technology adoption and earnings growth • Explosives volumes are expected to improve toward pre-COVID-19 levels in FY21 • Expected COVID-19 recovery and technology driven earnings growth1 of 10% by FY22 Explosive
Slide 22: Asia Pacific Explosives
Asia Pacific Explosives EBIT of A$149M, 17% vs pcp FY20 Revenue % Split FY20 Performance by Sector • Higher Base & Precious Metals volumes driven by strong Australian customer demand Metallurgical Coal and volume gains B&PM • Continued growth in technology sales despite COVID-19 slowing customer tri
Slide 23: Asia Pacific Explosives – Growth Opportunity
Asia Pacific Explosives – Growth Opportunity Earnings rebuild1 from FY21 driven by technology expansion Transformation to valued technology partner • Technology alliance with world’s largest miner • Solid platform of contracted tenure with sophisticated customer base • Technology growth in FY21 expe
Slide 24: Waggaman Agriculture & Industrial Chemicals
Waggaman Agriculture & Industrial Chemicals Waggaman: EBIT of US$32M, 69% vs pcp Ag & IC: EBIT of US$1M from US$0.2M in pcp Waggaman Operations Agriculture & Industrial Chemicals (Ag & IC) • FY20 production at 91% of name plate capacity1 and reliability • Improved plant production and efficiencies v
Slide 25: Fertilisers Asia Pacific
Fertilisers Asia Pacific EBIT of A$26M, from pcp loss of $80M Distribution Manufacturing • Distribution EBIT of $55M was up 37% on pcp • Manufacturing EBIT loss of $26M, up from $122M loss in pcp • Strong last 8 months performance in FY20 after slow start due • Positive earnings impact of $135M vs p
Slide 26: Fertilisers Distribution – Growth Opportunity
Fertilisers Distribution – Growth Opportunity Strengthening conditions supporting growth Leverage Distribution platform to drive growth Growth expectation underpinned by favourable conditions • Profitable & stable distribution earnings history • Distribution volumes & margins continue to recover, dr
Slide 27: Fertilisers Manufacturing – Opportunity
Fertilisers Manufacturing – Opportunity Strengthening conditions supporting continued growth Growth driven by improved manufacturing performance Growth underpinned by price recovery • Fertilisers prices recovering through 2020, with DAP & Urea Phosphate Hill up > 20% from recent lows • Strong produc
Slide 28: Manufacturing
MANUFACTURING Jeanne Johns Managing Director & Chief Executive Officer
Slide 29: Manufacturing Excellence
Manufacturing Excellence On track to deliver Manufacturing Excellence target by FY 2022 Substantial operational improvement in FY20 Ammonia Reliability2 – Major Plants • Strong reliability improvement, up to 86% (pcp: 80%) across key Overall % reliability plants 100% Target: 95% (3) ‒ Phosphate Hill
Slide 30: FY21 – FY23 Turnaround Schedule
FY21 – FY23 Turnaround Schedule Turnaround campaign to drive step change in reliability FY21 FY22 FY23 1H 2H 1H 2H 1H 2H St Helens, Oregon1 • Turnarounds under new manufacturing organisational construct and strategy, with reliability improvement Mt Isa, Queensland1 focus • All safety measures in pla
Slide 31: Technology
TECHNOLOGY Jeanne Johns Managing Director & Chief Executive Officer
Slide 32: Technology Driving Future Growth
Technology Driving Future Growth Electronic (million units sold) 6.0 Electronic Detonator Systems growth Detonator +5% continues Systems +32% 4.0 • Market share gains in Asia Pacific and continued conversion to 2.0 premium Electronic Detonators Targeting technology driven Systems in Americas Explosi
Slide 33: Technology Strategy Progress
Technology Strategy Progress Our Technology Strategy Our Vision Brought To Life Digital integration, data Nobel Fire digital platform commercialised and a connected bench Automated bulk explosives loading equipment built and tested CyberDet wireless detonator trials completed Advanced products, Pate
Slide 34: The Automated Connected Bench
The Automated Connected Bench Nobel Fire Digital Platform Connected Bench Outcomes A proprietary Dyno Nobel system Improved safety Nobel Fire performance Linking together unique design capabilities, bulk explosives products, explosives delivery Reduced impact on equipment and initiation systems the
Slide 35: Sustainability
SUSTAINABILITY Jeanne Johns Managing Director & Chief Executive Officer
Slide 36: FY20 Sustainability Overview
FY20 Sustainability Overview Greenhouse Gas (GHG) Absolute Member since 2010 Reduction Target1 5% Equal to 43,209 passenger vehicles being driven for one year Modern Slavery Policy Completed Solar Bloomberg Developed Hydrogen Study GEI Member (1) GHG reduction target of 5% by 2026 against IPL 2020 b
Slide 37: Strategic Highlights & Performance Update
STRATEGIC HIGHLIGHTS & PERFORMANCE UPDATE Jeanne Johns Managing Director & Chief Executive Officer
Slide 38: Outlook FY21
Outlook FY21 Dyno Nobel Americas Dyno Nobel Asia Pacific Fertilisers Explosives • Australian customer demand Distribution • Expect volumes to improve toward expected to remain solid in FY21 • Expectations for favourable pre-COVID-19 levels weather conditions supportive of • Indonesian Thermal Coal d
Slide 39: Strategic Priorities – FY21
Strategic Priorities – FY21 Continued safe operation in COVID-19 normal environment Focus on successful execution of two remaining turnarounds in FY21 Return to growth in Explosives in FY21, driven by premium technologies Acceleration of technology test trials following COVID-19 pause in FY20 Drive
Slide 40: Delivering the Strategic Agenda
Delivering the Strategic Agenda FY21 FY22+ Response Plan Response Plan • $30m annual benefits1 • $10m annual benefits1 Manufacturing Excellence Manufacturing Excellence: • Deliver turnaround program with • Unwinding of temporary FY21 turnaround impacts step change in reliability • Deliver world clas
Slide 41: Questions & Answers
QUESTIONS & ANSWERS 41
Slide 42: Appendix
Incitec Pivot INNOVATION ON THE GROUND APPENDIX
Slide 43: Dyno Nobel Americas – EBIT Waterfall
Dyno Nobel Americas – EBIT Waterfall EBIT excl IMIs US$ million 180 Explosives Ag & IC Waggaman 7 (6) (2) (12) (2) 3 160 21 (8) (12) 12 (10) 164 155 140 FY19 EBIT COVID-19 Coal Market Manufacturing COVID-19 Volumes Commodity Manufacturing Fixed Costs Commodity FY19 FY20 EBIT Response Volumes Volumes
Slide 44: Dyno Nobel Asia Pacific – EBIT Waterfall
Dyno Nobel Asia Pacific – EBIT Waterfall EBIT excl IMIs A$ million 200 Net Re-contracting (10) (28) 5 (10) 150 13 179 149 100 FY19 EBIT FY18 Western Contract Australian Manufacturing Market FY20 EBIT Australia Contracts Renewals (Gross) Technology Performance Volumes Growth 44
Slide 45: Fertilisers Asia Pacific – EBIT Waterfall
Fertilisers Asia Pacific – EBIT Waterfall EBIT excl IMIs A$ million Distribution Manufacturing Non-controllables 140 120 15 9 100 13 80 22 (103) 60 40 20 26 0 135 -20 -40 (80) (5) -60 20 -80 FY19 EBIT Distribution Distribution Manufacturing Gas Cost & FY19 SSP Plant Closure Insurance Proceeds Foreig
Slide 46: Target Higher Returns
Target Higher Returns Strategic initiatives and cycle improvement driving positive returns momentum Return On Invested Capital1 Strategic Initiatives Markets Strategic initiatives improving ROIC over the next 3 years Fertilisers Manufacturing Recovery5 Explosives Excellence Growth plan already Respo
Slide 47: Asia Pacific Explosives – End Markets
Asia Pacific Explosives – End Markets Metallurgical Coal Iron Ore • Australia's high-quality and cost competitive metallurgical coal Australian iron ore production growth expected to continue means the country remains in prime position to benefit from over the medium term to long term Asian (in part