Dyno Nobel Limited · ASX:DNL
Dyno Nobel — Incitec Pivot — FY2009 Earnings Presentation
32 slides from Dyno Nobel's earnings presentation, Nov 16, 2009
Slide 1: Incitec Pivot Limited 2009 Full Year Results
Incitec Pivot Limited 2009 Full Year Results 16 November 2009
Slide 2: James Fazzino, Managing Director & CEO
James Fazzino Managing Director & CEO
Slide 3: 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 4: IPL Group performance overview
IPL Group performance Overview Successful year 1 of Explosives US$ EBIT up 27% Challenging market conditions in North America Velocity delivering - cumulative US$71M EBIT benefits delivered & US$74M in cash North American AN strategy review – cessation of AN manufacture at Maitland and Battle Mounta
Slide 5: 2009 Results summary
IPL Group performance 2009 Results summary A$M 2009 2008 Change Sales Revenue 3,418.9 2,918.2 17% (1) EBITDA 743.0 1,025.6 (28%) EBIT (2) 575.7 955.3 (40%) NPAT pre individually material items 347.8 647.5 (46%) NPAT post individually material items (179.9) 614.3 Net Debt 1,463.4 2,030.3 28% (3) Gear
Slide 6: EBIT waterfall 2008 to 2009
IPL Group performance EBIT waterfall 2008 to 2009 – A$M 85.7 134.1 969.1 955.3 (13.8) (212.5) 575.7 (386.9) 2008 EBIT AASB 2008-8 2008 EBIT Explosives Velocity Fertilisers & Southern 2009 EBIT Reported Hedge Restated Industrial Cross Accounting Chemicals change 6
Slide 7: Balance of revenue & earnings
IPL Group performance Balance of revenue & earnings Diverse End-market exposures From a common nitrogen core Geographically spread Industrial Global Chemicals, IPL Ferts, 13% 3% Australian Fertiliser Business, 31% Asia Pacific, Explosives, Explosives, 49% 53% 52% North America, Fertilisers, 38% Glob
Slide 8: Explosives Scorecard
Explosives Scorecard Results Summary External market North American revenues down 19%(1) Asia Pacific revenues up 10%(1) Internal execution Explosives integration complete and successful Velocity US$71M cumulative EBIT benefits & US$74M in cash Plant reliability St Helens record production Good seco
Slide 9: Explosives Performance EBIT waterfall
Explosives Performance EBIT waterfall - 2008 proforma to 2009 actual – US$M 64.2 62.0 (62.3) (28.3) 13.6 222.2 9.4 (19.0) 22.9 (15.1) 174.8 2008 Proforma Asia Pacific Cheyenne Velocity Cash fixed North Business Price/Cost - AN Urea price Moranbah 2009 Actual EBIT sales volume uprate program cost Ame
Slide 10: Velocity program update
Velocity program update US$M Total 2008 2009 2010 Program Delivered Delivered Target Overhead reduction 51.4 9.9 21.9 9.6 EBIT Target’s Plant efficiency 71.4 9.9 24.5 2011 $38.0 Cost to Serve 43.3 18.4 18.9 2012 $35.0 Global supply chain, trading 37.9 10.9 7.0 204.0 9.9 61.1 60.0 Asset - Intensity 2
Slide 11: Fertilisers & Industrial Chemicals Scorecard
Fertilisers & Industrial Chemicals Scorecard Results Summary Unprecedented volatility in domestic/global volume demand and prices Market share maintained in a soft market Good manufacturing performance record production at Gibson Island good production at Southern Cross (excluding rail line outages)
Slide 12: Fertilisers & Industrial Chemicals EBIT History 2005 to 09
Fertilisers & Industrial Chemicals EBIT History – 2005 to 2009 876 Fertilisers & Industrial: $90.1M Fertiliser manufacturing Southern Cross: $186.3M underpinning profitability Total Fertilisers: $276.4M 35% Compound Annual 313 Growth Rate 276 2005 - 2009 126 78 2005 2006 2007 2008 2009 EBIT Compound
Slide 13: Fertilisers & Industrial Chemicals Performance
Fertilisers & Industrial Chemicals Performance EBIT waterfall - 2008 to 2009 302.6 Gibson Island Nitrogen: 100% of profit (76.2) (11.6) (17.2) (29.1) (28.2) 90.1 (50.2) 2008 EBIT Australian Industrial Fertilser SCI Trading - Contraction in GI nitrogen 2009 EBIT Fertiliser Chemicals - inventory write
Slide 14: Southern Cross Performance
Southern Cross Performance EBIT waterfall - 2008 to 2009 323.6 587.0 573.2 (13.8) 20.2 186.3 (646.8) (70.0) (4.1) (9.8) 2008 Reported AASB 2008-8 2008 Restated Forex - DAP Tampa FOB Freight - Volume - 828kt Sulphur costs Eliminations 2009 Reported EBIT Hedge EBIT 96.8cents to price - US$921/t US$111
Slide 15: Individually material items
Individually material items A$M Cash Tax - recognition of USD forex losses 158.7 Environmental clean-up (9.0) Velocity - integration & restructuring (38.0) Geelong plant closure (4.3) Manufacturing restructure (10.6) 96.8 Non-cash Write-down of Dyno Nobel goodwill (490.6) Phos rock write-down to NRV
Slide 16: Dyno Nobel - Goodwill
Dyno Nobel - Goodwill Change in discount rate $280M Current cyclical softness in North American explosives market $210M Non-cash write-down in goodwill $490M non-cash accounting entry 16
Slide 17: Frank Micallef, Chief Financial Officer
Frank Micallef Chief Financial Officer
Slide 18: Capital Management Outcomes – Net Debt, Working Capital & Capex
Capital Management Outcomes – Net Debt, Trade Working Capital & Capex Net debt reduced by A$642M in 2H 2009 - from A$2,105M to A$1,463M: Working capital management in both fertilisers and explosives Sustenance & turnaround capex tightly controlled at <A$105M Equity raising solid performance 18
Slide 19: Capital Management Initiatives - Funding
Capital Management Initiatives - Funding Funding Initiatives – refinancing the Bridge Facility 3-year Syndicated Bank Facility (multi-currency) A$1.68Bn Rights issue A$0.9Bn 1.5-year Working Capital Facility* (multi-currency) A$0.7Bn 5-year finance leases (A$) A$0.4Bn Achievements 3 investment grade
Slide 20: Capital Management – Headroom & Credit Metrics
Capital Management – Headroom & Credit Metrics Net debt at 30 September 2009 A$Bn Net debt 1.46 Headroom including cash 0.94 * 1.9 years (23 months) average tenor of committed facilities Investment grade credit metrics March 2009 Target range Net debt / EBITDA(1) 1.97x < 2.5x Interest cover(2) 7.5x
Slide 21: Capital Management – US Debt strategy
Capital Management – US Debt strategy Why do we fund in USD? • Protects credit metrics - favourable revaluation of debt when AUD appreciates and hedges the translation impact of USD asset positions • Reduces interest costs of A$45M (~300 basis points) in 2009 due to interest rate differential betwee
Slide 22: Capital Management – Dividends
Capital Management – Dividends Dividend policy • 20 - 40% pay-out of NPAT pre IMI’s subject to franking capacity, capital requirements and other relevant factors 2009 final dividend • 2.3 cents, unfranked, to be paid 18 December 2009 (record date 18/11/09) • Total dividends paid at 20% of NPAT, pre
Slide 23: Hedging USD sales
Hedging USD sales Assumptions US$M • 970kt MAP/DAP production @ US$366/t(1) FOB 355 • 405kt urea equivalent production @US$339/t(2) FOB 137 Notional transactional exposure at 2009 prices 492 Transactional forex sensitivity of +/- 1 cent = +/- A$9.5M EBIT(3) For 2010, US$200M or 41% hedged at AUD/USD
Slide 24: 2010 EBIT Sensitivities
2010 EBIT Sensitivities (1) DAP - Di-Ammonium Phosphate Tampa FOB +/- US$10/t = +/- A$13.7M (2) Urea - Middle East Granular Urea FOB +/- US$10/t = +/- A$5.5M (3) Transactional forex - DAP & Urea +/- 1 cent = +/- A$9.5M (4) Translation Forex - Explosives & Velocity earnings +/- 1 cent = +/- A$3.6M As
Slide 25: Finance – 2010 Focus
Finance – 2010 Focus Continued prudent financial management • Capital expenditure • Trade working capital • Operating cash flows • Hedging • People Capital Management • Debt tenor and diversity • Ratings & credit metrics continued financial discipline to ensure strong balance sheet 25
Slide 26: James Fazzino, Managing Director & CEO
James Fazzino Managing Director & CEO
Slide 27: Strategy – Evolution
Strategy – Evolution Five stages to the evolution of the IPL strategy, each building upon the previous. on 5. Common vo luti nitrogen egyE manufacturing trat core – S 4. Dyno Nobel diversified IPL acquisition downstream markets 3. Southern Cross acquisition 2. Lowest cost base 1. Historical Fertilis
Slide 28: Strategy – remains unchanged
Strategy – remains unchanged Incitec Pivot’s strategy is to leverage the industrialisation and urbanisation of the developing world (particularly China and India): • Positioned on the input side of the value chain where returns are highest and less volatile • Explosives for hard commodities and fert
Slide 29: Strategy - execution
Strategy - execution 1. Values driven - zero harm at the core 2. Deliver on the investment in Dyno Nobel: • Velocity program – US$204M by 2012 & US$200M capital • position business to benefit from US recovery 3. Improve plant and supply chain reliability 4. Growth from nitrogen core – Moranbah 5. Co
Slide 30: Outlook
Outlook • Challenging trading conditions to persist through 2010 in each of our downstream markets • Positives for medium term outlook • rebuilding of soil nutrients • recovery in US economy • Continued efficiency improvements from the Velocity program continued focus on controllables in 2010 30
Slide 31: Summary
Summary Unprecedented volatility in global end markets Pulled the levers we control and taken action Explosives acquisition delivering consistent with investment thesis Balance sheet robust – both credit metrics and headroom Strategy on track pulled the levers we control 31
Slide 32: Questions?
Questions? * Incitec Pivot Limited SouthernCross International