Slide 1: 2008 Half Year Results
For personal use only 2008 Half Year Results Presentation for Overseas Investor meetings
Slide 2: Orica - overview
For personal use only Orica - overview • Australian owned publicly listed company trading on the Australian Stock Exchange (ORI) • Market capitalisation of approximately A$9.0bn • Ranked in top 30 Australian companies based on market capitalisation • Inception in 1874 as a small explosives company s
Slide 3: Orica – what we do
For personal use only Orica – what we do Mining Services Commercial explosives, initiating systems Market and Blast Based Services Leadership Minova (including Excel Mining Systems) Leading Chemical consumables, equipment and Brands services for the underground mining, tunnelling and civil engineeri
Slide 4: Orica – business characteristics
For personal use only Orica – business characteristics Mining Services • Global business • Largest commercial explosives company in the world Chemical Services • Superior assets and technology • Largest Chemical business in • Complete product offering Australia and New Zealand • Strong asset positio
Slide 5: Business dimensions
Business dimensions For personal use only Half Year ended 31 March 2008 Sales Revenue EBIT Operating Net Assets Employees 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Mining Minova OCP Chemnet Chemical Services Orica Half Year Results 2008 5
Slide 6: Cumulative total shareholder returns
For personal use only Cumulative total shareholder returns 570 470 Cumulative Shareholder Return 370 270 % 170 70 -30 2001 2002 2003 2004 2005 2006 2007 Orica ASX 100 Growth strategy has delivered superior returns Source: Orica Annual Report, Base year 2001 Orica Half Year Results 2008 6
Slide 7: Group performance
For personal use only Group performance Half year ended 31 March (A$M) 2008 2007 % Sales 3,009.6 2,701.7 11.4 Gross margin 1,365.0 1,192.3 14.5 EBITDA 1 528.4 433.1 22.0 EBIT 1 423.0 345.6 22.4 Net profit after tax pre significant items 229.8 203.1 13.1 Net profit after tax after significant items 2
Slide 8: Divisional EBIT
For personal use only Divisional EBIT Half year ended 31 March (A$M) 2008 2007 % Mining Services 271.1 245.2 10.6 Minova 1 64.0 17.4 267.8 2 Consumer Products 59.9 43.2 38.7 Chemical Services 36.3 32.0 13.4 Chemnet 36.4 32.3 12.7 Total Businesses 467.7 370.1 26.4 Corporate Centre 3 (29.0) (18.5) (56
Slide 9: EBIT growth
EBIT growth A$M For personal use only 475 93 450 (18) 425 (11) 423 (8) (3) 400 375 24 350 346 325 300 HY07 EBIT Excel Underlying Foreign Insurance Cancellation A&R HY08 EBIT Contribution Business Exchange & One-Off of 5% Divestment Growth Items Preference Shares Underlying business EBIT growth of 27
Slide 10: Significant items
For personal use only Significant items Half year ended 31 March (A$M) 2008 2007 Dyno Nobel integration costs (3.7) (12.1) Minova/Excel integration costs (1.6) - Adhesives & Resins profit on sale - 19.4 Total significant items after tax and minority interests (5.3) 7.3 Orica Half Year Results 2008 1
Slide 11: Return on shareholders’ funds – Half year
For personal use only Return on shareholders’ funds 1 – Half year 25% 19.4% 20% 18.1% 17.0% 14.6% 15.5% 15.6% 15% 12.4% 10% 4.0% 5% 0% 2001 2002 2003 2004 2005 2006 2007 2008 1 Calculated as follows: annualised NPAT for period 1 October to 31 March / Average Shareholder Funds Orica Half Year Results
Slide 12: Orica’s approach – value drivers
For personal use only Orica’s approach – value drivers Orica Half Year Results 2008 12
Slide 13: SH&E - Safety
For personal use only SH&E - Safety Half Year Full Year 2008 2007 AWRCR 1 0.73 0.60 Recordable cases 68 104 Distribution incidents 11 28 Fatalities 2 - 1 1 All Worker Recordable Case Rate is calculated as the number of injuries and illnesses per 200,000 hours worked 2 There was one fatality in 2007
Slide 14: Gross margin growth – Half year
For personal use only Gross margin growth – Half year A$M 1,500 +14.5% 1,300 +18.1% 1,100 +7.1% +10.5% +7.8% 900 +10.7% -2.1% 700 500 2001 2002 2003 2004 2005 2006 2007 2008 Compound average first half growth rate since 2001 is 9% Orica Half Year Results 2008 14
Slide 15: Productivity – Half year
For personal use only Productivity1 – Half year 100% 92.7% 95% 90% 84.1% 85% 78.8% 77.4% 80% 75.5% 75.9% 73.5% 75% 71.2% 70% 65% 60% 55% 50% 2001 2002 2003 2004 2005 2006 2007 2008 Continuous improvement in productivity 1 Productivity is measured as fixed costs (incl. depreciation and amortisation)
Slide 16: Net profit after tax – Half year
For personal use only Net profit after tax – Half year A$M 250 +13.1% +39.3% 200 +13.8% 150 +26.0% +4.8% +20.6% 100 +167.1% 50 0 2001 2002 2003 2004 2005 2006 2007 2008 Compound average first half growth rate since 2001 is 34% Orica Half Year Results 2008 16
Slide 17: Divisional performance
For personal use only Divisional performance
Slide 18: Orica Mining Services
For personal use only Orica Mining Services Half year ended 31 March (A$M) 2008 2007 % Sales 1,580.9 1,506.5 4.9 EBITDA 335.6 305.7 9.8 EBITDA margin (%) 21.2% 20.3% 4.4 EBIT 271.1 245.2 10.6 EBIT margin (%) 17.1% 16.3% 4.9 Record result for Mining Services – 11% EBIT growth Orica Half Year Results
Slide 19: Orica Mining Services
Orica Mining Services Sales $1,581M; EBIT $271M; Average Net Assets $2,370M For personal use only A$M 700 20% 360 14 18% 600 340 24 16% EBIT MARGIN 500 14% 320 EBIT A$M 67 400 12% (39) 10% 300 300 8% (18) 280 (14) 271 200 6% (6) (2) 4% 260 100 245 2% 240 0 0% 2005 2006 2007 2008 220 200 1st Half EBI
Slide 20: Orica Mining Services by geography
For personal use only Orica Mining Services by geography Australia/Asia North America 350 24% 90 10% 22% 80 300 20% 70 8% EBIT MARGIN 18% EBIT MARGIN 250 60 EBIT A$M EBIT A$M 16% 200 14% 6% 50 12% 150 10% 40 4% 8% 30 100 6% 20 2% 50 4% 2% 10 0 0% 0 0% 2005 2006 2007 2008 2005 2006 2007 2008 1st Half
Slide 21: Acquired ex Dyno business performance
For personal use only Acquired ex Dyno business performance EBIT (A$M) 2008 Underlying trading performance of Ex Dyno Businesses 30.1 Synergies delivered 42.4 Amortisation of intangibles (4.5) 2008 EBIT 68.0 Synergy benefit of $90M will be delivered during 2008 – 12 months ahead of schedule Orica Ha
Slide 22: Acquired ex Dyno business - integration costs
For personal use only Acquired ex Dyno business - integration costs 2008 2007 Cumulative Integration cost category (A$M) Actual Actual Actual Asset write-offs – non cash - 52 52 Redundancies - 46 46 Transitional salaries/other - 13 13 Synergy implementation costs 4 14 18 Total Integration costs 4 12
Slide 23: Minova
For personal use only Minova Half year ended 31 March (A$M) 2008 2007 % Sales 337.0 115.5 191.8 EBITDA 78.2 22.1 253.8 EBITDA margin (%) 23.2% 19.1% 21.5 EBIT 64.0 17.4 267.8 EBIT margin (%) 19.0% 15.1% 25.8 Underlying EBIT 1 65.6 24.0 173.3 1 Underlying EBIT excludes the $1.6M one-off acquisition a
Slide 24: Minova
Minova Sales $337M; EBIT $64M; Average Net Assets $1,303M For personal use only A$M 80 5 24 70 (6) 64 (5) (1) 60 50 30 40 30 20 17 10 HY07 EBIT Excel EBIT Minova AIFRS Acq Acquisition Tunnelling FX HY08 EBIT Growth Accounting Amortisation Projects Adj 9 Completed acquisition of Excel 9 New business
Slide 25: Chemical Services
For personal use only Chemical Services Half year ended 31 March (A$M) 2008 2007 % Sales 208.6 229.7 (9.2) EBITDA 48.3 41.2 17.2 EBITDA margin (%) 23.2% 17.9% 29.6 EBIT 36.3 32.0 13.4 EBIT margin (%) 17.4% 13.9% 25.2 Underlying EBIT 1 36.3 29.1 24.7 1 Underlying EBIT excludes earnings from the Adhes
Slide 26: Chemical Services
Chemical Services Sales $209M; EBIT $36M; Average Net Assets $399M A$M For personal use only 80 20% 45 5 70 18% 16% 60 40 EBIT MARGIN 14% 6 (3) EBIT A$M 50 12% 36 (3) 40 10% 35 (1) 30 8% 32 6% 20 30 4% 10 2% 0 0% 25 2005 2006 2007 2008 20 1st Half EBIT 2nd Half EBIT EBIT MARGIN HY07 EBIT Mining Wate
Slide 27: Chemnet
For personal use only Chemnet Half year ended 31 March (A$M) 2008 2007 % Sales 486.5 469.5 3.6 EBITDA 40.6 36.1 12.5 EBITDA margin (%) 8.3% 7.7% 7.8 EBIT 36.4 32.3 12.7 EBIT margin (%) 7.5% 6.9% 8.7 Underlying EBIT1 up 17% 1 Underlying EBIT excludes earnings from asset sales in 2007. Orica Half Year
Slide 28: Chemnet
Chemnet Sales $487M; EBIT $36M; Average Net Assets $381M For personal use only A$M 90 12% 40 80 10% 1 70 1 36 EBIT MARGIN 3 (1) 60 8% 35 EBIT A$M 50 32 6% 40 30 30 4% 20 2% 10 25 0 0% 2005 2006 2007 2008 20 1st Half EBIT 2nd Half EBIT EBIT MARGIN HY07 EBIT Net Volume/ Latin Cash Fixed Asset Sales HY
Slide 29: Orica Consumer Products
For personal use only Orica Consumer Products Half year ended 31 March (A$M) 2008 2007 % Sales 446.6 424.4 5.2 EBITDA 67.0 50.8 31.9 EBITDA margin (%) 15.0% 12.0% 25.0 EBIT 59.9 43.2 38.7 EBIT margin (%) 13.4% 10.2% 31.4 Underlying EBIT 1 59.9 52.7 13.7 1 Excludes the one-off Yates restructuring pro
Slide 30: Orica Consumer Products
Orica Consumer Products Sales $447M; EBIT $59M; Average Net Assets $236M For personal use only A$M 120 14% 65 4 100 12% 10 (2) 60 60 (1) (1) 10% EBIT MARGIN 80 55 EBIT A$M 8% 60 50 2 6% 5 40 4% 45 43 20 2% 40 0 0% 35 2005 2006 2007 2008 30 HY07 Volume/ Yates Yates Env. Marketing China Other HY08 1st
Slide 31: Corporate centre and other support services
For personal use only Corporate centre and other support services Half year ended 31 March (A$M) 2008 2007 $ Corporate centre costs 29.0 18.5 10.5 Other support costs 15.7 6.0 9.7 Total Costs 44.7 24.5 20.2 Corporate Centre Other support costs È Cancellation costs on 5% Preference È Increased net co
Slide 32: Capital management - key measures
For personal use only Capital management - key measures Half year ended 31 March 2008 2007 Net Debt (A$M) 2,184.5 1,233.0 Net Interest Expense (A$M) 90.4 54.6 Interest Cover (times) 4.7 6.3 Operating Cash ($) 161.1 256.2 Cash Conversion 1 (%) 48.9 69.5 Rolling TWC to Sales (%) 14.9 14.2 Gearing (%)
Slide 33: Debt refinancing - outcome
For personal use only Debt refinancing - outcome • Increase in overall limit by A$300M to A$2.3B • Benefit of Orica’s strong banking relationships • Increased tenor: 1 year tranche significantly reduced, 3 year tranche increased and a new 5 year tranche added • Multi currency, flexible and cancellab
Slide 34: Net debt and gearing
For personal use only Net debt and gearing Target gearing range shaded 2,200 50 Gearing and Adjusted Gearing % 1,800 40 Net Debt (A$M) 1,400 30 1,000 20 600 10 200 0 HY01 FY01 HY02 FY02 HY03 FY03 HY04 FY04 HY05 FY05 HY06 FY06 HY07 FY07 HY08 Gearing 42.9% Adjusted gearing1 47.8% 1 Gearing recalculate
Slide 35: Cashflow
Cashflow Half year ended 31 March (A$M) 2008 2007 $ For personal use only EBITDA 528.4 433.1 95.3 Net interest paid (81.7) (46.8) (34.9) Net tax paid (96.4) (56.1) (40.3) Trade working capital movement (134.3) (89.9) (44.4) Non trade working capital movement (54.9) 15.9 (70.8) Net operating cash flo
Slide 36: Cash Conversion
For personal use only Cash Conversion1 Half year ended 31 March (A$M) 2008 2007 EBITDA 528.4 433.1 TWC movement (134.3) (89.9) NTWC movement (54.9) 15.9 Sustenance (80.8) (58.3) Cash Conversion 258.4 300.8 Cash Conversion % 48.9% 69.5% 1 Cash conversion is calculated as EBITDA add/less movement in w
Slide 37: Rolling TWC to Sales %
For personal use only Rolling TWC to Sales % 22.5% 20.0% 17.5% 15.0% 12.5% 10.0% 02 05 03 06 07 04 08 01 02 04 05 03 06 07 - - - - - - - p- p- p- p- p- p- p- ar ar ar ar ar ar ar Se Se Se Se Se Se Se M M M M M M M Reduced from 17.5% in May 2006 to 14.9% in March 2008 Renewed effort required Orica Ha
Slide 38: Capital expenditure – Half year
For personal use only Capital expenditure – Half year Sustenance Spend A$M 90 120% as a % of depreciation 80 100% 70 80% 60 60% 50 40% 40 30 20% 20 0% 2001 2002 2003 2004 2005 2006 2007 2008 Sustenance 1 % of Depreciation Sustenance capital $76M and Depreciation $85M to March 2008 1 Sustenance capit
Slide 39: Capital management - 2008
For personal use only Capital management - 2008 • Priority for second half – improved trade working capital management and cash generation • Restoring gearing to our target range • Credit Rating – committed to BBB+ Orica Half Year Results 2008 39
Slide 40: 2008 priorities
For personal use only 2008 priorities
Slide 41: Growth priorities
For personal use only Growth priorities Business Strategic growth opportunity Mining Services - Strength of resource cycle continues - Lowest cost AN sourcing - Capitalise on tightening AN market conditions - Electronic blasting systems (EBS) - Enhanced product offerings (BBS) - Small bolt-on M&A Or
Slide 42: OMS – AN expansion
OMS – AN expansion • Progressing Bontang For personal use only – Long lead items ordered – Land reclamation well underway – To be submitted for Board approval FY 2008 • Latin America – Access to gas has been priority – Assessing viability of imported ammonia option – Market demand supports a new pla
Slide 43: Growth priorities
For personal use only Growth priorities Business Strategic growth opportunity Minova - Integration of Excel – deliver the synergies - Geographic and organic growth including small M&A opportunities Orica Half Year Results 2008 43
Slide 44: Excel acquisition
Excel acquisition • Established 2 dedicated teams to deliver the synergies For personal use only – both commercial and operational • Tax and finance structuring synergies already delivering • Successful first phase – customers / employees retained • Some early wins – Combined product offering – Admi
Slide 45: Growth priorities
For personal use only Growth priorities Business Strategic growth opportunity Consumer Products - Continued investment in marketing and R&D - Ongoing establishment of a platform in Asia Chemical Services - Capitalise on expanded sodium cyanide capacity - Progressive move into water treatment value a
Slide 46: Productivity priorities
For personal use only Productivity priorities • Metric is trending ahead of expectation • Each business is responsible and accountable for improving productivity • Final phase of ex Dyno business integration • Complete Yates restructure • Productivity includes revenue and cost focus • Delivery of Mi
Slide 47: Culture priorities
For personal use only Culture priorities • Roll out Deliver the Promise to Minova • Investment in our people: – INSEAD program • First course completed • Next group in May 2008 – Exploring new development programs for entry and middle level employees – Graduate program – expanded internationally Ori
Slide 48: SH&E - Environmental
For personal use only SH&E - Environmental • Botany – Plume is contained – Recycled water being utilised – looking to increase volumes • Hexachlorobenzene – Objection process continues – Progressing alternate solutions • No other significant matters identified in current period Orica Half Year Resul
Slide 49: SH&E - Sustainability
For personal use only SH&E - Sustainability • Challenge 2010 targets established • Improved performance on all measures in March half • At or below 2010 targets on water consumption and waste generation • Working on solutions globally as carbon markets continue to evolve • Initiatives being tested t
Slide 50: Outlook
For personal use only Outlook Despite some adverse impacts from rising input costs and foreign exchange, our businesses continue to perform to expectation. Accordingly we see no reason to change our prior outlook statement in that Group net profit (before significant items) in 2008 is expected to be
Slide 51: Supplementary information
For personal use only Supplementary information
Slide 52: EBIT contribution by business platform
For personal use only EBIT contribution by business platform1 March 2007 2,3 March 2008 Chemnet Chemnet 8.1% Chemical 7.8% Chemical Services Services 8.1% 7.8% Minova 8.8% Minova 13.7% Mining Mining Services Consumer Services 58.0% Products 61.8% 13.3% Consumer Products 12.8% 1 Excludes corporate co
Slide 53: EBIT contribution by geography
For personal use only EBIT contribution by geography March 2007 March 2008 Other Other Europe 0.8% Europe 0.8% 13.5% 15.4% Latin America Latin Australia America Australia 11.5% 43.0% 43.6% 9.4% North America North 10.2% America Asia 16.2% 11.1% New Zealand Asia New Zealand 9.3% 9.1% 6.1% Orica Half
Slide 54: Gross sales by geography
For personal use only Gross sales by geography March 2007 March 2008 Other Other Europe Europe 0.7% 0.9% 12.6% 13.1% Asia Asia 7.9% 7.6% Australia Australia 42.5% 44.4% Latin Latin America America 12.0% 11.4% North North America New Zealand New Zealand America 14.0% 8.5% 6.6% 17.8% Orica Half Year R
Slide 55: Net interest expense
For personal use only Net interest expense Half year ended 31 March (A$M) 2008 2007 $ Net interest expense 90 55 35 u Comprising: Interest on net debt 86 50 36u Add: Unwinding of discount on provisions 4 5 1n Net interest expense 90 55 35 u Interest on net debt calculated as: Average net debt (throu
Slide 56: Impact of SPS – earnings per share
For personal use only Impact of SPS – earnings per share Reported per Accounts A$M Reported net profit from continuing operations 236.5 Less: Net profit attributable to minorities (12.0) After tax distributions to SPS holders 1 (14.0) Adjusted net profit 210.5 Weighted average ordinary shares on iss
Slide 57: Impact of SPS – gearing
For personal use only Impact of SPS – gearing (A$M) Reported per Hybrid Accounts Adjusted Current borrowings 1,046.4 1,046.4 Non-current borrowings 1,375.9 1,375.9 SPS adjustment 2 - 250.0 Less: Cash (237.8) (237.8) Net Debt 2,184.5 2,434.5 Parent entity equity 1 2,827.3 2,827.3 Minority interests 8
Slide 58: Impact of SPS – interest cover
For personal use only Impact of SPS – interest cover (A$M) Reported per Hybrid Accounts Adjusted Financial expense 111.1 111.1 Financial income (20.7) (20.7) SPS distribution adjustment 1 - 9.8 Net borrowing costs 90.4 100.2 EBIT 423.0 423.0 Less net profit attributable to minorities - (12.0) Adjust
Slide 59: Debt profile
For personal use only Debt profile 4,000 3,500 Net debt 3,000 post Excel 2,500 A$M 2,000 1,500 1,000 500 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Financial Year Drawn facilities Undrawn facilities Orica Half Year Results 2008 59
Slide 60: Foreign currency - snapshot
For personal use only Foreign currency - snapshot Material exposures include: Offshore EBIT (Translation) Transactional Exposures • North America • AUD/USD • Europe • USD/CLP/MXN • New Zealand • USD/CAD • LATAM • USD/NZ • Nordics • USD/EUR • NOK/SEK Net impact of a 1% move in exchange rates on a div
Slide 61: Disclaimer
For personal use only Disclaimer 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 intended to be used as the