Dyno Nobel Limited · ASX:DNL
Dyno Nobel — H1 2021 Earnings Presentation
43 slides from Dyno Nobel's earnings presentation, May 17, 2021
Slide 1: 2021 Half Year Financial Results Presentation
2021 HALF YEAR FINANCIAL RESULTS PRESENTATION 17 May 2021 Incitec Pivot Limited ABN 42 004 080 264 ASX Code: IPL OTC: INCZY
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 Focus on COVID safe operations and refresh of Safety Tools Total Recordable Injury Frequency Rate Potential High Severity Incidents(2) (TRIFR)(1) 42 1.02 33 34 Target: 0.94 Sustainable 19 0.80 Improvement 0.72 13 15 0.82 0.70 17 0.68 0.58 0.70 23 20 19 17 TARGET 2H 1H FY18 FY19 FY20 1H21 1
Slide 5: 1H21 Overview
1H21 Overview First half performance impacted by planned manufacturing turnarounds and unplanned outages. Solid customer facing business performance underpinned by technology growth in Explosives and delivery of the Response Plan Earnings Before Interest & Tax Net Profit After Tax Dividend (EBIT)(1)
Slide 6: Significant Potential Upside in Earnings Through 2023
Significant Potential Upside in Earnings Through 2023 5 Fertiliser Recovery 4 Manufacturing Excellence Leverage Distribution footprint & commodity price recovery 3 Explosives Growth Opportunity of $40M to $50M(3) per annum by FY23 Strong performance in 2 Response Plan Targeting technology driven Aus
Slide 7: Waggaman Plant Update
Waggaman Plant Update Increased scale and breadth of skills to fully resource the repair, re-start and resilience of the plant Repair Team Re-Start Team Reliability Taskforce Fix current outage issues: Re-start plant and assure strong run Address longer term reliability issues • Identify root causes
Slide 8: Waggaman Outlook
Waggaman Outlook Taskforce stretch objective – exit FY21 at reliable nameplate production The Waggaman plant has produced 205kMt year to date. While we are not aware of anything specific that would result in plant downtime in the last four months of the year, our team is focused on reducing risks th
Slide 9: Journey to Manufacturing Excellence 2019 – 2023
Journey to Manufacturing Excellence 2019 – 2023 PREVENTATIVE & PREDICTIVE OPERATING IMPROVED TURNAROUND POST TURNAROUND MAINTENANCE DISCIPLINE (TA) CYCLE OPTIMISATION & FOCUS • Strategy – from Reactive to • High Reliability focus on • Improved predictability in • Agreed operating strategy to Planned
Slide 10: $40M to $50M Manufacturing Excellence delivery
$40M to $50M Manufacturing Excellence delivery On target to deliver $40M-$50M, date extended to FY23 - turnaround delays due to COVID-19 impacts Plant Contribution(1) Status Comments Well progressed on turnaround planning, mini turnarounds Phosphate Hill $15M - $20M TA 2H22 every 15 weeks reduce rel
Slide 11: Long Term Climate Change - Pathway to Net Zero Emissions
Long Term Climate Change - Pathway to Net Zero Emissions As we work towards a low emissions future Materiality & scale EVALUATE ‘Clean’ hydrogen TRL(4) of technologies Carbon capture Access to critical infrastructure EMISSION & use or storage Government policies SOURCES N2O(1) abatement (by jurisdic
Slide 12: Group Financial Results
GROUP FINANCIAL RESULTS Nick Stratford Chief Financial Officer 12
Slide 13: Response Plan
Response Plan Plan on track - delivered on FY21 first half target • On target to deliver sustained incremental cost savings of $60M(1) per annum by FY22 $60M • Response Plan delivery to 31 March 2021: 2022 ⎯ $20M of incremental savings delivered in 1H21 $10M ⎯ $40M of incremental savings delivered p
Slide 14: Group Result 1H21
Group Result 1H21 EBIT of A$110M, 31% vs pcp Group EBIT Movements EBIT A$ Million 180 Manufacturing Customer Facing Business Timing Non- Corp 159 Controllables 160 140 (14) (7) 120 25 4 110 100 6 3 80 (1) (59) 60 (6) 40 20 0 1H 20 EBIT Manufacturing Rail Outage Manufacturing DNA DNAP Fertilisers Uns
Slide 15: Profit & Loss
Profit & Loss Summary of Corporate Costs, Borrowing Cost and Taxation Net Borrowing Costs down $11M to $64M 1H21 1H20 Change • Favourable movements: IPL Group A$M A$M A$M ⎯ Lower average debt balance in 1H21 compared to pcp following equity Revenue 1,724 1,848 (124) raising ⎯ Benefit of favourable m
Slide 16: Cash Flows
Cash Flows Seasonal Trade Working Capital build supports strong 2H21 cash flow 1H21 1H20 Change EBITDA ex IMIs down 15% vs pcp Cash flow A$M A$M A$M • Operational cash flows impacted by reduced manufacturing EBITDA 286 338 (52) contributions from planned and unplanned outages Interest paid (62) (77)
Slide 17: Focus on Balance Sheet Strength
Focus on Balance Sheet Strength Balance Sheet de-leveraging in line with strategy 1H21 1H20 Financial Indebtedness 31 Mar 31 Mar Net debt A$M A$M A$M 2021 2020 Change Debt facilities 1,587 2,528 Net debt (excluding hedges) 1,476 2,381 (905) Other borrowings 13 65 Lease liabilities 242 236 6 Total in
Slide 18: 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 • Commitment to sustainable investment • Strong focus on cost, trade working • ROIC(1) targets and actions in pl
Slide 19: Operating Performance
OPERATING PERFORMANCE Jeanne Johns Managing Director & Chief Executive Officer
Slide 20: Summary of Segment Financial Performance
Summary of Segment Financial Performance EBIT 1H21 Performance Commentary A$ million 1H21 1H20 Change • DNA Explosives impacted by $15M (US$11M) unplanned outages Dyno Nobel Americas 31 113 (82) at Cheyenne and Louisiana Ammonium Nitrate plants. Dyno Nobel Asia Pacific 70 71 (1) • Waggaman plant ear
Slide 21: Americas Explosives
Americas Explosives Adjusted for manufacturing outages EBIT of US$44M, 21% vs pcp EBIT of US$55M, 1% vs pcp EBIT of A$60M, 29% vs pcp EBIT of A$74M, 12% vs pcp 1H21 Revenue % Split by Sector 1H21 Performance 80% non-coal • Strong Explosives earnings (ex Manufacturing earnings impact) -1% in challeng
Slide 22: Americas Explosives – Markets
Americas Explosives – Markets Outlook positive across all sectors Base & Precious Metals • Volume growth expected across all sectors with strong Gold and Copper prices supporting mines as they recover from FY20 COVID-19 closures • DNA volumes are expected to grow in the 2H vs FY20, driven by mine re
Slide 23: Asia Pacific Explosives
Asia Pacific Explosives EBIT of A$70M, 1% vs pcp 1H21 Performance • Continued growth in technology product margins (+$9M) offsetting impact from re-contracting (-$8M). 1H21 Revenue % Split by Sector WA contract losses (as previously disclosed in 2018) accounted for a $3M earnings reduction. Internat
Slide 24: Asia Pacific Explosives – Markets
Asia Pacific Explosives – Markets Positive outlook across Metallurgical Coal and Iron Ore Metallurgical Coal • Volume growth (~8% year on year) expected in Metallurgical Coal production with markets in India, Europe and South America replacing tonnes previously sold to China. Metallurgical coal repr
Slide 25: Fertilisers Asia Pacific
Fertilisers Asia Pacific EBIT of A$20M, $30M from pcp loss of $10M 1H21 Revenue Split by Sector(1) 1H21 Performance • Relatively flat distribution volumes and margins in a competitive market with some sales deferred into 2H due to March flooding • Strong manufacturing performance (up $6M excluding t
Slide 26: Fertilisers Asia Pacific – Markets
Fertilisers Asia Pacific – Markets Favourable conditions supporting strong 2H21 MARKETS PERDAMAN – OFFTAKE AGREEMENT DAP Cotton Australian Fertilisers for Australian Farmers • Water availability expected to Strategic Alignment support improved cotton market • Access to secure local supply at Interna
Slide 27: Technology
TECHNOLOGY Jeanne Johns Managing Director & Chief Executive Officer
Slide 28: Technology Driving Future Growth
Technology Driving Future Growth Electronic (million units sold) 3 Detonator +15% Systems +26% 2 Targeting technology driven 1 Explosives EBIT growth1 of 10% by FY22 0 1H18 1H19 1H20 1H21 Premium (thousand metric tonnes sold) Emulsion 250 Electronic Detonators Systems represent a 200 small proportio
Slide 29: 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 30: Technology Strategy Progress
Technology Strategy Progress Our Technology Strategy Our Vision Brought To Life Nobel Fire digital platform in rapid scale up Fragmentation density model (FDM) commercialised during the period Digital integration, data Geologic Element Motion (GEM) model development on track and a connected bench Au
Slide 31: Sustainability
SUSTAINABILITY Jeanne Johns Managing Director & Chief Executive Officer
Slide 32: 1H21 Sustainability Actions
1H21 Sustainability Actions Release of IPL’s 10th GRI(1) Incorporation of UN SDG’s into Submission of the 1st IPL Modern aligned Sustainability Report 2020 Sustainability Report Slavery Statement (2020) Re-admitted to the DJSI for Sustainability-linked syndicated Re-admitted to the 10th year in a ro
Slide 33: Managing Climate Change – 2021 action plan
Managing Climate Change – 2021 action plan Actions in 1H21 Actions for 2H21 • Publication of Solar Hydrogen Feasibility Study • Risk and opportunity assessment update by ARENA(1) ⎯ Refresh of 2o & 4o Scenarios • Installation of improved N2O(2) process emissions ⎯ Addition of 1.5o & ‘Inevitable Polic
Slide 34: Outlook & Strategic Priorities
OUTLOOK & STRATEGIC PRIORITIES Jeanne Johns Managing Director & Chief Executive Officer
Slide 35: Outlook – 2H21
Outlook – 2H21 Stronger than normal weighting to 2H earnings and cash flow expected(1) • Unsold Manufactured Ammonium Phosphate Commodity 1H21 Realised Spot Price Price US$/mt US$/mt product on hand, to realise in excess of $25M in profit in 2H21 at current market prices Ammonia 256 545(2) DAP 426 5
Slide 36: Strategic Priorities – FY21
Strategic Priorities – FY21 Continued safe operation in COVID-19 normal environment Focus on Manufacturing Excellence - WALA production and Moranbah turnaround completion Return to growth in Explosives(1), driven by premium technologies Acceleration of technology test trials following COVID-19 pause
Slide 37: Questions & Answers
QUESTIONS & ANSWERS 37
Slide 38: Appendix
Incitec Pivot Limited INNOVATION ON THE GROUND APPENDIX
Slide 39: Growth Through Supporting Essential Industries
Growth Through Supporting Essential Industries INNOVATION AND HIGHEST QUALITY EXPOSURE TO 83% 1 EBIT EXPLOSIVES 17% EBIT 1 COMPETITIVE ADVANTAGE AUSTRALIA’S LARGEST Best premium technology in the market today, ideally suited for growth markets/sectors INTEGRATED SUPPLIER Strategically located assets
Slide 40: Dyno Nobel Americas – EBIT Waterfall
Dyno Nobel Americas – EBIT Waterfall 40
Slide 41: Dyno Nobel Asia Pacific – EBIT Waterfall
Dyno Nobel Asia Pacific – EBIT Waterfall Technology 41
Slide 42: Fertilisers Asia Pacific – EBIT Waterfall
Fertilisers Asia Pacific – EBIT Waterfall EBIT A$ Million Non- 25 Manufacturing Distribution Timing Controllables 39 20 20 15 10 5 0 6 (5) 7 (10) (10) (7) (15) (1) (20) (8) (6) 1H 20 Manufacturing Rail Outage Turnaround Response Plan Distribution Unsold Commodity 1H 21 Reliability – Insurance Volume
Slide 43: 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