Slide 1: 2015 Half Year Results
For personal use only 2015 HALF YEAR RESULTS 12 May 2015
Slide 2: Disclaimer
Disclaimer For personal use only Forward looking statements This presentation has been prepared by Orica Limited. The information contained in this presentation is for informational purposes only. The information contained in this presentation is not investment or financial product advice and is not
Slide 3: Agenda
Agenda For personal use only 1H15 Results Summary Alberto Calderon Interim Managing Director & CEO Financial Performance Craig Elkington Executive Director Finance Outlook and Building Resilience Alberto Calderon Interim Managing Director & CEO Questions 3 © Orica Limited Group 3
Slide 4: Strong Focus on Safety & Environment
STRONG FOCUS ON SAFETY & ENVIRONMENT For personal use only 0.6 10 • Standardised work safety practices 0.54 applied globally 9 0.5 8 • Complete integration of Safety and Risk Management Programs 0.40 7 Injury Frequency Rate 0.4 0.37 6 • Reduction in the Severity Rate with continued focus on reducing
Slide 5: Resilience in Challenging Markets
RESILIENCE IN CHALLENGING MARKETS For personal use only • EBITDA1 of $472 million, down 5% • EBIT1 of $330 million, down 9% • NPAT1 of $211 million, down 3% • Net operating and investing cashflow2 of $110 million • Total AN product volumes increased by 3% • Advanced products and services contributed
Slide 6: Financial Performance
For personal use only FINANCIAL PERFORMANCE Craig Elkington, Executive Director Finance
Slide 7: Group Financial Performance
GROUP FINANCIAL PERFORMANCE For personal use only Half year ended 31 March (A$M) 2015 2014 % Continuing Operations1 Sales revenue 2,809.4 2,801.7 (0) EBITDA2 472.1 499.0 (5) EBIT3 330.0 363.8 (9) NPAT4 211.0 218.2 (3) Earnings per share (cents) 56.9 59.5 (4) Net Operating and Investing cash flow5 10
Slide 8: Group EBIT Performance from Continuing Operations
GROUP EBIT PERFORMANCE FROM CONTINUING OPERATIONS For personal use only A$M 400 79 382 (64) 364 (38) 350 (28) 12 330 (12) 17 300 250 200 150 100 Market impacts 50 0 EBIT Volume Net price Net price FX Transfor- Sub total One-off Asset EBIT HY14 regional/ explosives Cyanide mation transfor- sales HY15
Slide 9: Global AN Volumes Up 3%
GLOBAL AN VOLUMES UP 3% For personal use only Change in Explosives volume & regional mix1 1H15 vs 1H14 10% 9% 3% 0% Australia North Latin EMEA Asia 2 Total Pacific America America (3%) (5%) • Australia Pacific: lower volumes in coal and iron ore markets • North America: coal market volumes up. Growt
Slide 10: Market and Transformation Impacts
MARKET AND TRANSFORMATION IMPACTS For personal use only Volume regional / product mix Transformation benefits ($38m) • AN volumes increased 3% • Good progress on transformation program • Change in regional/product sales $79m mix • Strong delivery of supplier and labour efficiency initiatives • Cyani
Slide 11: Investing Activities
INVESTING ACTIVITIES For personal use only Capital Expenditure1 (A$M) HY14 HY15 FY15 Actual Actual Forecast Continuing Operations1 - Sustaining 78 64 160 - 170 - Customer facing contract capital2 32 33 65 - 75 - Growth 31 53 95 - 100 - Burrup AN Plant 57 30 80 - 85 Continuing Operations1 198 180 400
Slide 12: Cash and Debt Management
CASH AND DEBT MANAGEMENT For personal use only Half year ended 31 March (A$M) 2015 2014 % Company Target Net operating and investing cashflow1 110 124 (12) Net Debt 1,894 2,370 (20) Gearing (%)2 29.4% 36.5% 7.1pts 35 - 45% Interest cover (times)3 7.0x 6.7x 0.3x >5x Net Interest Expense 48 60 20 Effe
Slide 13: Outlook and Building Resilience
For personal use only OUTLOOK AND BUILDING RESILIENCE Alberto Calderon Interim Managing Director & CEO
Slide 14: 2015 Outlook
2015 OUTLOOK Global markets remain volatile and uncertain and FY15 profit guidance continues to be For personal use only difficult to provide in these circumstances. After incorporating two months of additional information, key assumptions are : • Global AN product volumes in the range of 3.75 ± 0.1
Slide 15: Building Resilience in Challenging Markets
BUILDING RESILIENCE IN CHALLENGING MARKETS For personal use only 1 Structural shifts and margin headwinds being felt by both our customers and Orica 2 Rapid action and structural factors are helping to deliver ‘through-cycle’ earnings resilience 3 Longer term, Orica is well positioned – but we need
Slide 16: Mining Sector Under Price and Margin Pressures
MINING SECTOR UNDER PRICE AND MARGIN PRESSURES For personal use only Price boom has ended… … but production growth continues Resource prices indexed to 2015 Australia resource export volume, million tonnes 250 Thermal Coal* 200 Met Coal* 200 Iron ore* 150 Gold Iron Copper 100 Ore 150 50 Thermal 100
Slide 17: Ammonium Nitrate Oversupply
AMMONIUM NITRATE OVERSUPPLY For personal use only AN volume oversupply • Global surplus capacity supports Orica’s Oversupply as % of demand capital light strategy 20 Auspac – 2m tonnes of external sourcing Global • Slowing of mining growth in Australia leading to near-term oversupply, however: 10 –
Slide 18: Challenges in Ground Support; Sodium Cyanide Stabilising
CHALLENGES IN GROUND SUPPORT; SODIUM CYANIDE STABILISING For personal use only Ground Support: Demand falling NaCN: Price pressure NA underground volume, million tonnes NaCN price1 movement 110 Illinois Basin Less Ground Support required -11% in Illinois Basin 90 AUD -29% 70 Central USD Appalachian
Slide 19: Building Resilience in Challenging Markets
BUILDING RESILIENCE IN CHALLENGING MARKETS For personal use only 1 Structural shifts and margin headwinds being felt by both our customers and Orica 2 Rapid action and structural factors are helping to deliver ‘through-cycle’ earnings resilience 3 Longer term, Orica is well positioned – but we need
Slide 20: We Have Strengthened Our Contract Profile
WE HAVE STRENGTHENED OUR CONTRACT PROFILE For personal use only Forward book • We are de-risking future price Percent of Orica’s projected AusPac volumes exposure by securing contracts, in Australia/Pacific and globally 12 months ago 90 • Our ‘forward book’ of volumes Today significantly higher toda
Slide 21: Transformation Benefits Are Being Delivered to Plan
TRANSFORMATION BENEFITS ARE BEING DELIVERED TO PLAN For personal use only Initiatives Progress Benefits • Strategic • Over 60% of assessment of supplier contracts A$m HY15 Sourcing FY152 suppliers successfully Actual renegotiated One-Off 100 - • Leveraged • Further 550 FTE Costs1 64 120 global scale
Slide 22: Improving Sourcing Efficiency
IMPROVING SOURCING EFFICIENCY For personal use only Reviewing procurement contracts Percent of global spend1 Nitrates global sourcing initiatives • Swapping from ammonia- Other 30 backed supply to lower cost North gas-backed supply America • Optimising network operations Eng & Plnt 12 for key contra
Slide 23: Improving Labour Efficiency
IMPROVING LABOUR EFFICIENCY For personal use only Orica support efficiencies • Total headcount reduced by ~7% FTEs by function1, March 2014 to 2015 over past year Change 13,709 12,693 -7% • Efficiency savings focused on non- Support customer facing functions: -22% – Leveraged global scale and Manufa
Slide 24: Structural Resilience: Geographic Diversity
STRUCTURAL RESILIENCE: GEOGRAPHIC DIVERSITY For personal use only Diverse geographic portfolio Portfolio cushions regional variation Orica regional revenue split1, percent AN product volumes, kt 2,500 Australia EMEA /Pacific 19 2,000 28 1,500 Others2 18 Latin America 1,000 7 Asia 500 28 Australia No
Slide 25: Structural Resilience: Broad Exposure Beyond AN Products
STRUCTURAL RESILIENCE: BROAD EXPOSURE BEYOND AN PRODUCTS For personal use only By mining commodity By product / services offering2 % of revenue1 % of revenue1 Mining Other Other Thermal Chemicals Packaged 4 4 16 Coal Emulsion Explosives 8 products 24 29 Ground Support 10 Gold 20 5 Coking Coal 7 Iron
Slide 26: Structural Resilience: Production Exposure
STRUCTURAL RESILIENCE: PRODUCTION EXPOSURE For personal use only Production growth tracks GDP • While exploration and Commodity forecast volumes, indexed to 2015 construction boom has passed, production volumes expected to 130 Thermal Coal1 Copper grow in line with GDP Met Coal 1 Gold 120 – Demand u
Slide 27: Building Resilience in Challenging Markets
BUILDING RESILIENCE IN CHALLENGING MARKETS For personal use only 1 Structural shifts and margin headwinds being felt by both our customers and Orica 2 Rapid action and structural factors are helping to deliver ‘through-cycle’ earnings resilience 3 Longer term, Orica is well positioned – but we need
Slide 28: We Need to Execute on Our Strategy
WE NEED TO EXECUTE ON OUR STRATEGY For personal use only • Improved process efficiencies – data-enabled Efficient operating • Manufacturing optimisation model • Organisation model and accountabilities • Product quality and reliability Optimised supply • Security of supply network • Cost effective an
Slide 29: Unique Global Position to Partner With Customers
WE HAVE A UNIQUE GLOBAL POSITION TO PARTNER WITH OUR CUSTOMERS For personal use only Operations in 50+ countries 4500+ employees located on 450 customer sites or at regional operational hubs Industry leading R&D investment 1500 blasts per day globally 1000+ MMU’s 42 manufacturing plants located on c
Slide 30: Advanced Blasting Is Helping Improve Customer Productivity
ADVANCED BLASTING IS HELPING IMPROVE CUSTOMER PRODUCTIVITY For personal use only Enhancing our customers’ milling efficiency Advanced Blasting revenue up 9% in PLANT ENERGY FRAGMENTATION: THROUGHPUT: CONSUMPTION: the past 12 months – a range of 18 to 45% 6.5% 4.6% Passing under 1 inch Increase Reduc
Slide 31: Journey From Leading Supplier to Partner of Choice
ORICA ON A JOURNEY FROM ‘LEADING SUPPLIER’ TO ‘PARTNER OF CHOICE’ For personal use only Supplier Partner • Product led offers, • Innovative advanced blasting Strengthen our underpinned by strong solutions (e.g. industry leader for sources of technical expertise ’big data’ and blast optimisation) dif
Slide 32: In Conclusion...
IN CONCLUSION... • Orica’s embedded advantages of diversity by geography, customer, products and services For personal use only are being extended through focused execution in managing the elements within our control: – Resetting cost base – Rationalising and optimising manufacturing footprint – Ext
Slide 33: Supplementary Information
For personal use only SUPPLEMENTARY INFORMATION
Slide 34: Explosives Volumes
EXPLOSIVES VOLUMES For personal use only HY15 volumes Variance – HY15 volumes vs. HY14 volumes ‘000 tonnes AN1 Emulsion Total AN1 Emulsion Total products 2 products 2 Australia/Pacific 167 382 549 (9%) (3%) (5%) North America 428 175 603 21% (9%) 10% Latin America 137 222 359 13% 6% 9% EMEA 16 184 2
Slide 35: Explosives Contribution per Tonne
EXPLOSIVES CONTRIBUTION PER TONNE For personal use only Change in Explosives contribution per tonne 1H15 vs 1H14 25% 9% (0%) Australia North Latin EMEA Asia Total Pacific America America (4%) (3%) (17%) 1. Contribution includes all income and costs attributable to the sale of explosives products and
Slide 36: Cash Conversion
CASH CONVERSION For personal use only Half year ended 31 March (A$M) 2015 2014 EBITDA 493.4 552.8 TWC movement (136.9) (54.7) Sustaining Capital 1 (85.8) (99.4) Cash Conversion 270.7 398.7 Cash Conversion %2,3 54.9% 72.1% 1. Includes a component of customer facing contract capital to the extent that
Slide 37: Net Interest Expense
NET INTEREST EXPENSE For personal use only Half year ended 31 March (A$M) 2015 2014 Change ($) Interest on net debt 64.5 72.1 (7.6) Unwinding of discounts on provisions 0.6 0.9 (0.3) Major external finance leases 0.1 0.2 (0.1) Capitalised interest (17.2) (13.0) (4.2) Net interest expense 48.0 60.2 (
Slide 38: Interest Cover
INTEREST COVER For personal use only Half year ended 31 March (A$M) 2015 2014 Change ($) Finance income 24.0 17.5 6.5 Finance expense1 (72.0) (77.7) 5.7 Net financing costs (48.0) (60.2) 12.2 EBIT 338.3 402.4 (64.1) Interest cover (times) 7.0x 6.7x 0.3x 1. Financial expense in 2015 includes the impa
Slide 39: FX Exposure
FX EXPOSURE For personal use only FX translation basket • Basket of ~45 currencies translated to composition AUD earnings Other 8% • Limited EBIT translation hedging in place EMEA block (with full participation) USD 15% 39% • Net EBIT translation impact 1H15 = $11m Latin America • Further net transa
Slide 40: Debt Profile
DEBT PROFILE For personal use only Facility Headroom Drawn Debt Maturity Profile A$m A$m Average tenor at March 2014 – 6.3 years Average tenor at March 2015 – 5.5 years 4,500 $4,053 $4,084 600 4,000 500 3,500 1,553 1,668 3,000 400 2,500 300 2,000 1,500 200 2,500 2,416 1,000 100 500 0 0 Sep-14 Mar-15
Slide 41: Environmental Provisions
ENVIRONMENTAL PROVISIONS For personal use only Environmental Provisions (A$M) HY15 FY14 Botany groundwater remediation 64 59 Botany HCB remediation 35 35 Botany mercury remediation 8 9 Other 65 65 Total environmental provisions 172 168 Provision Spend Profile $47m $45m 21 30 $23m 9 $19m 8 4 4 2 2 2
Slide 42: Environment
ENVIRONMENT For personal use only 120 Non-compliance with site licence conditions 100 Number of non-compliances 80 60 40 20 0 2011 2012 2013 2014 YTD 2015 • Maintaining low level of non-compliance with site licence conditions – Majority of non-compliances relate to high rainfall events at Yarwun, pr
Slide 43: Australia Pacific
AUSTRALIA PACIFIC For personal use only 1H15 Revenue by 1H15 Revenue by • EBIT of $239m, down 6% category commodity – Reduced explosives and ground support demand and lower pricing; offset by transformation program benefits 5% Q&C Other 9% • Explosives volumes down 5% 13% 4% – Coal down 8%; weaker m
Slide 44: North America
NORTH AMERICA • EBIT of $58m. Including the contribution For personal use only 1H15 Revenue by 1H15 Revenue by from Global Hub activities, EBIT was category commodity $101m • Explosives volumes up 10% 17% Other 15% Thermal – increase in coal market volumes offset weakness in coal 30% Western Canada
Slide 45: Latin America
LATIN AMERICA For personal use only 1H15 Revenue by 1H15 Revenue by • EBIT of $25m. Including the category commodity contribution from Global Hub activities, EBIT was $52m 1% 9% Other, 9% • Explosives volumes up 9% Q&C, 8% Thermal – Higher volumes in Peru and Columbia offset by coal, 11% lower sales
Slide 46: EMEA
EMEA For personal use only 1H15 Revenue by 1H15 Revenue by • EBIT of $43m, up 2% category commodity Thermal • Explosives volumes flat coal Coking 8% coal – Growth in Nordics, South West Europe and CIS; offset 1% 24% by lower volumes in Turkey Other 29% • Revenue from Advanced products and Gold servi
Slide 47: Asia & Other
ASIA & OTHER For personal use only 1H15 Revenue by 1H15 Revenue by • Asia & Head Office EBIT down $14m category commodity – Weaker market conditions in Asia 1% Other – One-off transformation costs 12% • Explosives volumes down 3% – Reduced volumes in Indonesia due to weak coal Q&C 15% demand, lower
Slide 48: Non IFRS Reconciliation
NON IFRS RECONCILIATION For personal use only Half year ended 31 March (A$M) 2015 2014 % Continuing Operations 1 Statutory profit after tax 211.0 218.2 (3) Adjust for the following: Net financing costs 48.1 59.4 (20) Income tax expense 64.0 73.9 (13) Non-controlling interests 6.9 12.3 (44) EBIT 330.
Slide 49: Non IFRS Reconciliation
NON IFRS RECONCILIATION For personal use only Half year ended 31 March (A$M) 2015 2014 % Consolidated Group 1 Statutory profit after tax 222.1 242.1 (8) Adjust for the following: Net financing costs 48.0 60.2 (20) Income tax expense 60.9 87.4 (30) Non-controlling interests 7.3 12.7 (43) EBIT 338.3 4
Slide 50: Disclosures and Definitions
DISCLOSURES AND DEFINITIONS For personal use only Term Definition Statutory profit after tax Net profit for the period attributable to shareholders of Orica Limited as disclosed in note 11 within Appendix 4D – Orica Half Year Report. EBIT Profit/(loss) before individually material items, net financi