Orica Limited · ASX:ORI
Orica — US PP Conference (January 2008)
41 slides from Orica's conference presentation, Jan 29, 2008
Slide 1: US PP Conference Orica Presentation
For personal use only US PP Conference Orica Presentation January 2008
Slide 2: Group performance
For personal use only Group performance Year ended 30 September (A$M) 2007 2006 % Sales 5,527.2 5,359.2 3.1 u Gross margin 2,474.0 2,125.2 16.4 u EBITDA 995.9 814.6 22.3 u EBIT 812.7 657.7 23.6 u Net profit after tax pre significant items 497.8 380.3 30.9 u Net profit after tax after significant ite
Slide 3: Divisional EBIT
For personal use only Divisional EBIT Year ended 30 September (A$M) 2007 2006 % Mining Services 575.1 412.0 39.6 u Minova 1 61.6 - - Consumer Products 2 101.6 97.3 4.4 u Chemical Services 68.7 67.1 2.4 u Chemnet 58.7 57.7 1.7 u Fertilisers - 74.3 100.0 v Total Businesses 865.7 708.4 22.2 u Corporate
Slide 4: EBIT growth
For personal use only EBIT growth A$M 900 62 850 78 813 800 (80) 95 750 700 658 650 600 FY06 EBIT Ex-Dyno Underlying Minova Divested FY07 EBIT Business Businesses Growth US PP Conference - Orica Full Year Results 2007 4
Slide 5: Orica's approach – value drivers
For personal use only Orica’s approach – value drivers US PP Conference - Orica Full Year Results 2007 5
Slide 6: Gross margin growth
For personal use only Gross margin growth A$M 2,600 16.4% 2,400 2,200 7.6% 4.3% 2,000 13.9% 1,800 8.2% 0.1% 6.1% 1,600 1,400 1,200 1,000 2001 2002 2003 2004 2005 2006 2007 Cumulative average growth rate since 2001 is 8.3% US PP Conference - Orica Full Year Results 2007 6
Slide 7: Productivity
For personal use only Productivity 100% 95% 91.8% 90% 85% 78.9% 80% 75.1% 74.0% 73.2% 72.8% 75% 69.8% 70% 65% 60% 55% 50% 2001 2002 2003 2004 2005 2006 2007 Productivity is measured as fixed costs (incl. depreciation and amortisation) as a percentage of gross margin. US PP Conference - Orica Full Ye
Slide 8: Net profit after tax
For personal use only Net profit after tax A$M +30.9% 500 +11.9% 400 +4.4% +20.5% +13.0% 300 +283.8% 200 100 0 2001 2002 2003 2004 2005 2006 2007 Cumulative average growth rate since 2001 is 41.4% US PP Conference - Orica Full Year Results 2007 8
Slide 9: Divisional performance
For personal use only Divisional performance
Slide 10: Orica Mining Services
For personal use only Orica Mining Services Year ended 30 September (A$M) 2007 2006 % Sales 3,111.2 2,620.9 18.7 u EBITDA 697.9 506.0 37.9 u EBITDA margin (%) 22.4 19.3 16.1 u EBIT 575.1 412.0 39.6 u EBIT margin (%) 18.5 15.7 17.8 u Return on net assets (%) 25.6 25.1 Average operating net assets 2,2
Slide 11: Orica Mining Services
Orica Mining Services Sales $3,111M; EBIT $575M; Average Net Assets $2,246M; RONA 26% For personal use only A$M 700 20% 700 18% 600 16% 650 35 EBIT MARGIN 500 14% 49 EBIT A$M (29) 400 12% 600 (18) 575 10% 53 (17) (5) 300 8% 550 6% 95 200 500 4% 100 2% 450 0 0% 412 2004 2005 2006 2007 400 350 1st Hal
Slide 12: Orica Mining Services by geography
For personal use only Orica Mining Services by geography Australia/Asia North America 350 24% 90 12% 22% 80 300 20% 10% 70 EBIT MARGIN 18% EBIT MARGIN 250 60 8% EBIT A$M EBIT A$M 16% 200 14% 50 12% 6% 150 10% 40 8% 30 4% 100 6% 20 50 4% 2% 2% 10 0 0% 0 0% 2004 2005 2006 2007 2004 2005 2006 2007 1st
Slide 13: Acquired ex Dyno business performance
For personal use only Acquired ex Dyno business performance EBIT (A$M) 2007 Underlying trading performance of Ex Dyno Businesses 59.7 Synergies delivered 70.4 Amortisation of intangibles (8.9) 2007 EBIT 121.2 Synergy Benefit (A$M) 2007 2008 2009 Current View 70 90 90 March 2007 50-60 80-90 90 US PP
Slide 14: Acquired ex Dyno business - integration costs
For personal use only Acquired ex Dyno business - integration costs 2006 2007 Cumulative Integration cost category (A$M) Actual Actual Actual Asset write-offs – non cash 45 7 52 Redundancies 41 5 46 Transitional salaries/other 7 6 13 Synergy implementation costs 4 10 14 Total Integration costs 97 28
Slide 15: Minova
For personal use only Minova Nine months ended 30 September (A$M) 2007 Sales 332.1 EBITDA 75.1 EBITDA margin (%) 22.6 EBIT 61.6 EBIT margin (%) 18.5 Underlying EBIT 1 68.2 Return on net assets (%) 2 10.1 Average operating net assets 905.6 1 Underlying EBIT excludes the $6.6M one-off acquisition acco
Slide 16: Minova
Minova Sales $332M; EBIT $62M; Net Assets $906M; Pro forma RONA 10.1% For personal use only A$M 80 75 3 10 70 (7) 65 62 61 (4) (1) 60 55 50 FY06 Business Cost AIFRS Acq FX Amortisation FY07 EBIT Pro-rata Growth Synergies Accounting EBIT Adj 9 Underlying EBIT growth of 12% 9 Result includes AIFRS one
Slide 17: Chemical Services
For personal use only Chemical Services Year ended 30 September (A$M) 2007 2006 % Sales 425.1 477.0 10.9 v EBITDA 87.8 85.0 3.3 u EBITDA margin (%) 20.7 17.8 15.9 u EBIT 68.7 67.1 2.4 u EBIT margin (%) 16.2 14.1 14.9 u Underlying EBIT 1 65.8 59.1 11.3 u Return on net assets (%) 17.4 17.7 Average ope
Slide 18: Chemical Services
Chemical Services Sales $425M; EBIT $69M; Average Net Assets $394M; RONA 17% For personal use only A$M 80 18% 80 2 4 70 16% 75 60 14% 6 EBIT MARGIN (5) EBIT A$M 12% 50 70 69 10% 67 (4) (1) 40 8% 65 30 6% 20 4% 60 10 2% 0 0% 55 2004 2005 2006 2007 50 FY06 EBIT Mining Miex Watercare A&R Watercare Wate
Slide 19: Chemnet
For personal use only Chemnet Year ended 30 September (A$M) 2007 2006 % Sales 927.7 987.4 6.0 v EBITDA 66.4 66.0 0.6 u EBITDA margin (%) 7.2 6.7 7.1 u EBIT 58.7 57.7 1.7 u EBIT margin (%) 6.3 5.8 8.3 u Return on net assets (%) 16.9 15.4 Average operating net assets 346.4 375.6 Underlying EBIT in lin
Slide 20: Chemnet
Chemnet Sales $928M; EBIT $59M; Average Net Assets $346M; RONA 17% For personal use only A$M 90 12% 75 80 1 1 10% 70 11 70 EBIT MARGIN 60 8% EBIT A$M 65 50 6% 60 59 40 58 (12) 30 4% 55 20 2% 10 50 0 0% 45 2004 2005 2006 2007 40 1st Half EBIT 2nd Half EBIT EBIT MARGIN FY06 EBIT Fixed Latin Profit on
Slide 21: Orica Consumer Products
For personal use only Orica Consumer Products Year ended 30 September (A$M) 2007 2006 % Sales 826.3 785.0 5.3 u EBITDA 116.3 111.5 4.3 u EBITDA margin (%) 14.1 14.2 0.9 v EBIT 101.6 97.3 4.4 u EBIT margin (%) 12.3 12.4 0.8 v Underlying EBIT1 111.1 97.3 14.2 u Return on net assets (%) 43.7 44.4 Avera
Slide 22: Orica Consumer Products
Orica Consumer Products Sales $826M; EBIT $102M; Average Net Assets $233M; RONA 44% For personal use only A$M 120 14% 125 11 100 12% 120 10% 115 (4) (1) EBIT MARGIN 80 EBIT A$M 13 8% 110 60 6% 105 (10) 102 40 (4) 4% 100 97 20 2% 95 90 0 0% 2004 2005 2006 2007 85 1st Half EBIT Yates Restructure Impac
Slide 23: Corporate centre and other support services
For personal use only Corporate centre and other support services Year ended 30 September (A$M) 2007 2006 $ Corporate centre costs 39.3 36.3 3.0 v Other support costs 13.7 14.4 0.7 u TOTAL COSTS 53.0 50.7 2.3 u 9 Qenos doubtful debt provision reversal È Takeover defence and unsuccessful ($8M) – non-
Slide 24: Capital management - highlights
For personal use only Capital management - highlights Year ended 30 September 2007 2006 Net Debt 1 (A$M) 1,305.7 302.1 Net Interest expense (A$M) 122.6 92.2 Interest Cover (times) 6.6 7.1 Cash Conversion 2 (%) 63.8 52.5 Rolling TWC to Sales (%) 14.8 16.6 Gearing (%) 33.2 10.2 Gearing adjusted (%) 3
Slide 25: Cashflow
For personal use only Cashflow Year ended 30 September (A$M) 2007 2006 $ EBITDA 995.9 814.6 181.3 u Net interest paid (108.3) (90.3) 18.0 v Net tax paid (141.4) (101.6) 39.8 v Trade working capital movement (49.2) (212.6) 163.4 u Non trade working capital movement (172.7) 3.8 176.5 v Net operating c
Slide 26: Net debt and gearing
For personal use only Net debt and gearing Target gearing range shaded 1,600 50 Gearing and Adjusted Gearing % 1,400 40 Net Debt (A$M) 1,200 30 1,000 800 20 600 10 400 200 0 HY01 FY01 HY02 FY02 HY03 FY03 HY04 FY04 HY05 FY05 HY06 FY06 HY07 FY07 Accounting gearing 33.2% Adjusted gearing 39.6% (SPS sec
Slide 27: Cash Conversion
For personal use only Cash Conversion1 100% 87.8% 90% 80% 75.2% 68.1% 70.2% 70% 62.2% 63.8% 60% 52.5% 50% 40% 2001 2002 2003 2004 2005 2006 2007 1 Cash conversion is calculated as EBITDA add/less movement in working capital less sustenance capital spend. US PP Conference - Orica Full Year Results 20
Slide 28: Rolling TWC to Sales %
For personal use only Rolling TWC to Sales % 25.0% TWC Project started May 2006 20.0% 15.0% 10.0% 5.0% 1 2 3 4 5 6 7 t'0 t'0 t'0 t'0 t'0 t'0 t'0 p p p p p p p Se Se Se Se Se Se Se Continuous improvement Reduced from 17.5% in May 2006 to 14.8% in 2007 US PP Conference - Orica Full Year Results 2007 2
Slide 29: Capital expenditure
For personal use only Capital expenditure 160 120% Sustenance Spend A$M as a % of depreciation 140 100% 120 80% 100 60% 80 40% 60 20% 40 0% 2001 2002 2003 2004 2005 2006 2007 Sustenance % of Depreciation Sustenance capital $139M and Depreciation $153M in 2007 US PP Conference - Orica Full Year Resul
Slide 30: Capital management - 2008
For personal use only Capital management - 2008 • 2008 Focus – cash generation • Restoring gearing to our target range • Credit Rating – committed to BBB+ – Underwritten DRP US PP Conference - Orica Full Year Results 2007 30
Slide 31: Capital Management - Portfolio
For personal use only Capital Management - Portfolio • Have been active over a number of years in reshaping portfolio • We view the shape and composition of Orica as a continual “work in progress” US PP Conference - Orica Full Year Results 2007 31
Slide 32: Supplementary information
For personal use only Supplementary information
Slide 33: EBIT contribution by business platform
For personal use only EBIT contribution by business platform1 September 2006 2 September 2007 3,4 Chemnet Chemical Chemnet 9% 7% Services Chemical 8% Services 11% Minova 9% Consumer Products Mining Mining Consumer Services 15% Services Products 64% 65% 12% 1 Excludes corporate costs 2 September 2006
Slide 34: Gross sales by geography
For personal use only Gross sales by geography September 2006 1 September 2007 Europe Europe Asia 7% 13% 8% Asia 8% Latin America 10% Australia Australia 49% Latin America 45% 12% North America 17% North America New Zealand 15% New Zealand 9% 7% 1 September 2006 sales exclude IPL US PP Conference -
Slide 35: Net interest expense
For personal use only Net interest expense Year ended 30 September (A$M) 2007 2006 $ Net interest expense 123 92 31 u Comprising: Interest on net debt 113 101 12 u Less: Capitalised interest (1) (14) 13 v Add: Unwinding of discount on provisions 11 5 6u Net interest expense 123 92 31 u Interest on n
Slide 36: Impact of Excel – gearing
For personal use only Impact of Excel – gearing (A$M) Rating Pro-forma Agency Post Excel Current borrowings 582.7 582.7 Non-current borrowings 1,093.7 1,868.7 SPS adjustment 2 250.0 250.0 Less: Cash (370.7) (370.7) Net Debt 1,555.7 2,330.7 Parent entity equity 1 2,566.8 2,566.8 Minority interests 60
Slide 37: Step-Up Preference Securities (SPS)
For personal use only Step-Up Preference Securities (SPS) • SPS treated as 100% equity for financial reporting purposes • SPS distributions are treated as dividends and NOT interest • EPS calculation adjusted for SPS distributions on an after tax basis • Rating agencies treat SPS as 50% equity / 50%
Slide 38: Impact of SPS – gearing
For personal use only Impact of SPS – gearing (A$M) Reported per Rating Accounts Agency Current borrowings 582.7 582.7 Non-current borrowings 1,093.7 1,093.7 SPS adjustment 2 - 250.0 Less: Cash (370.7) (370.7) Net Debt 1,305.7 1,555.7 Parent entity equity 1 2,566.7 2,566.7 Minority interests 60.9 60
Slide 39: Impact of SPS – interest cover
For personal use only Impact of SPS – interest cover (A$M) Reported per Rating Accounts Agency Financial expense 157.4 157.4 Financial income (34.8) (34.8) SPS distribution adjustment 1 - 19.5 Net borrowing costs 122.6 142.1 EBIT 812.7 812.7 Less net profit attributable to minorities - (25.7) Adjust
Slide 40: Debt maturity – long term debt
For personal use only Debt maturity – long term debt A$M 300 275 250 225 200 USD 175 NZD 150 EUR 125 CAD 100 AUD 75 50 25 0 2008 2009 2011 2013 2015 2016 2017 2019 Average term of debt is approximately 7 years NB: The time scale on the table above is not linear, as some years have no debt repayment
Slide 41: Foreign currency - snapshot
For personal use only Foreign currency - snapshot Material exposures include: Offshore EBIT (Translation) Transactional Exposures • North America • AUD/USD • Europe • USD/LATAM region • New Zealand • USD/CAD • LATAM • NZD/USD • Nordics • NOK/SEK Net impact of a 1% move in exchange rates on a diversi