Orica Limited · ASX:ORI
Orica — H1 2022 Earnings Presentation
42 slides from Orica's earnings presentation, May 12, 2022
Slide 1: 2022 Half Year Results
2022 Half Year Results 12 MAY 2022 Sanjeev Gandhi | Managing Director & CEO Christopher Davis | Chief Financial Officer Public
Slide 2: Disclaimer
Disclaimer This presentation is in summary form and is not necessarily complete. It should be read together with Orica’s Half Year Report and other announcements lodged with the Australian Securities Exchange, which are available at www.asx.com.au This announcement contains information that is based
Slide 3: Agenda
AGENDA 2022 Half Year Results First half in review Slide 4 Financial performance Slide 10 Strategy in action Slide 20 Outlook Slide 25 2022 HALF YEAR RESULTS 3 Public
Slide 4: First half in review
First half in review SANJEEV GANDHI, MANAGING DIRECTOR & CEO 2022 HALF YEAR RESULTS 4 Public
Slide 5: Safety and sustainability are at the heart of our purpose
SAFETY AND SUSTAINABILITY Safety and sustainability are at the heart of our purpose Safety and our people Caring for the community and environment • Maintained zero fatality workplace • Zero serious environmental incidents • Continued focus on improving our safety • Loss of containment and potable w
Slide 6: Accelerating decarbonisation and moving towards a low-carbon future
SAFETY AND SUSTAINABILITY Accelerating decarbonisation and moving towards a low-carbon future Climate change Executed our decarbonisation milestones to plan • Tertiary catalyst abatement technology operational at Carseland with performance above expectation Accelerating • Kooragang Island Decarbonis
Slide 7: Improved result driven by better market conditions & refreshed strategy
HALF YEAR RESULTS Improved result driven by better market conditions & refreshed strategy Underlying EBIT1,2 AN volume $245m 2.04mt • Improved performance driven by strong global commodity markets UP 58% vs pcp UP 5% vs pcp – Strengthened volume growth, particularly in Australia, Indonesia and Latin
Slide 8: Improved performance across all segments
FIRST HALF BUSINESS PERFORMANCE Improved performance across all segments Australia Pacific & Asia North America Latin America • Strengthened volume growth • Increased volume from higher • Strengthened AN and EBS volume • Good pricing discipline in contract commodity demand growth, driven by improved
Slide 9: Russia-Ukraine conflict drives lower AN volumes in EMEA
FIRST HALF BUSINESS PERFORMANCE Russia-Ukraine conflict drives lower AN volumes in EMEA Europe, Middle East & Africa Orica Monitor • Lower AN volumes due to disrupted mining activity as a • Strengthened radar sales and growth in recurring contracts result of Russia-Ukraine conflict and slower contra
Slide 10: Financial Performance
Financial Performance CHRISTOPHER DAVIS, CHIEF FINANCIAL OFFICER 2022 HALF YEAR RESULTS 10 Public
Slide 11: Strengthened first half result
FINANCIAL RESULT Strengthened first half result 20221 20211,2 Change Half year ended 31 March ($M) Restated Sales revenue 3,277 2,623 25% Underlying EBITDA3 424 343 24% Underlying EBIT4 245 155 58% Underlying NPAT5 129 76 71% Individually significant items after tax6 (214) 3 Statutory net profit / (
Slide 12: One-off items driven by asset sales and impact of Russia
INDIVIDUALLY SIGNIFICANT ITEMS One-off items driven by asset sales and impact of Russia Gross Tax Net Half year ended 31 March 2022 ($M) (before (after tax) tax) Gain on sale of Minova and Nitro Consult businesses 30 (2) 28 Release of foreign currency translation reserve from sale of Minova and Nitr
Slide 13: Improved result driven by better market conditions & refreshed strategy
EBIT BRIDGE Improved result driven by better market conditions & refreshed strategy Orica Group EBIT 1H21 to 1H22 ($M) 8 245 17 8 2 21 14 28 155 (8) Underlying Foreign Volume Manufacturing Mix & Mining Orica Monitor Other Discontinued Underlying EBIT exchange margin chemicals operations2 EBIT 1 1H21
Slide 14: Continues to be within range and includes spend on sustainability initiatives
CAPITAL EXPENDITURE Continues to be within range and includes spend on sustainability initiatives Total capital expenditure in line with expectations for the first half; full year expectation remains Capital expenditure ($M)1 unchanged at $340 million - $360 million FY22 Growth 323 expectation: • Sp
Slide 15: Lower cash as a result of an increase in working capital
CASH FLOW Lower cash as a result of an increase in working capital Net operating cash flow1 ($M) Cash conversion2 (%) 619 138.6 480 145 62.9 66.1 104 139 41 (157) FY20 FY21 1H22 1H20 3 1H21 3 1H22 4 H1 H2 1. Restated to reflect application of IFRIC Interpretation Configuration or Customisation Costs
Slide 16: Input cost increases driving inventory and trade receivables value
RISING INPUT COST Input cost increases driving inventory and trade receivables value Inventory +27% Far East CFR ammonia index 1 ($USD/t) + 67% ($M) 809 1,200 636 1,000 800 600 400 200 30 Sep 31 Mar 0 18… 15… 29… 13… 27… 10… 24… 22… 19… 14… 28… 11… 25… 23… 20… 8 Jul… 4… 1… 5… 9… 6… 3… 2021 2022 Tamp
Slide 17: Trade working capital days improving
TRADE WORKING CAPITAL Trade working capital days improving Trade working capital ($M) Days inventory held1 Trade working capital ($M) 569 576 438 69 28 64 64 173 576 (63) 31 Mar 30 Sep 31 Mar 31 Mar 30 Sep 31 Mar 438 2021 2021 2022 2021 2021 2022 Days sales outstanding1 Days payables outstanding1 62
Slide 18: Net debt and gearing remain within target range
NET DEBT Net debt and gearing remain within target range Net debt1 & gearing ($M, %) Movement in net debt1,2 ($M) 166 38.2% 38.3% 225 34.6% 1,645 1,479 53 (112) 1,821 1,645 1,479 FY20 2 FY21 2 1H22 FY21 Dividends Net Foreign 1H22 net debt paid cash exchange net debt (excl lease outflow translation (
Slide 19: Balance sheet and liquidity profile
FINANCIAL POSITION Balance sheet and liquidity profile Available liquidity ($M) Debt covenants1 • Cash and undrawn committed facilities provide liquidity of $1.7 billion Gearing (%) 1,661 57.5% • Significant headroom to gearing and interest cover debt covenants 38.3% • Well distributed debt maturity
Slide 20: Strategy in action
Strategy in action SANJEEV GANDHI, MANAGING DIRECTOR & CEO 2022 HALF YEAR RESULTS 20 Public
Slide 21: Positioning Orica to deliver shareholder value
STRATEGY Positioning Orica to deliver shareholder value 2022 HALF YEAR RESULTS 21 Public
Slide 22: Our approach focuses on four business verticals
WHERE WE WILL WIN – FOUR BUSINESS VERTICALS Our approach focuses on four business verticals Mining Quarry and construction • Blasting in mining at the core of our business • Leading player in the growing quarry and construction sector • Future-facing commodities growing ahead of GDP • Well positione
Slide 23: Accelerated roll-out of technology, unlocking value in manufacturing network
MINING VERTICAL Accelerated roll-out of technology, unlocking value in manufacturing network • Continued to grow in future facing commodities, with new contracts secured in nickel, copper & Focusing on growing lithium commodity markets • Considerable proportion of Australia Pacific and Latin America
Slide 24: Orica Digital Solutions well positioned to become end-to-end solutions provider
DIGITAL SOLUTIONS VERTICAL Orica Digital Solutions well positioned to enable Orica to become industry’s first end-to-end solutions provider DOWNSTREAM OREBODY BLASTDESIGNAND MEASUREMENT & INTELLIGENCE EXECUTION OPTIMISATION Orica Digital Solutions (Sites implemented) In-situ orebody knowledge Automa
Slide 25: Outlook
Outlook SANJEEV GANDHI, MANAGING DIRECTOR & CEO 2022 HALF YEAR RESULTS 25 Public
Slide 26: Full year outlook remains unchanged
OUTLOOK Full year outlook remains unchanged • Momentum in EBIT from the ongoing businesses is expected to continue in the second half. There will be no further contribution from Russia operations or Nitro Consult AB. • Previous expectations of drivers of margin improvement on the pcp remain: ‒ Volum
Slide 27: A clear pathway towards profitable growth and value creation
STRATEGIC PLAN A clear pathway towards profitable growth and value creation for our stakeholders 0-3 years Status Pursue organic growth from the core Accelerate adoption of innovative blasting technologies and digital solutions, both upstream and downstream Optimise manufacturing and supply chains G
Slide 28: Supplementary information
Supplementary information 2022 HALF YEAR RESULTS 28 Public
Slide 29: Explosives volumes
SUPPLEMENTARY INFORMATION Explosives volumes Half year ended 31 March 2022 volumes vs pcp ‘000 tonnes Emulsion Emulsion AN 1 Total AN 1 Total products 2 products 2 Australia Pacific & Asia 355 492 847 29% (4%) 8% North America 260 265 525 1% 6% 4% Latin America 128 348 476 11% 6% 7% Europe, Middle E
Slide 30: Segment analysis
SUPPLEMENTARY INFORMATION Segment analysis Half year ended 31 March 2022 2021 Variance $M EBIT External revenue EBIT External revenue External revenue EBIT (restated) 1 Australia Pacific & Asia 1,194 155 943 110 27% 41% North America 707 55 576 48 23% 15% Latin America 668 24 431 13 55% 85% Europe,
Slide 31: Diversified global business
SUPPLEMENTARY INFORMATION Diversified global business Revenue by region 1 Revenue by commodity 1 Revenue by product/service type 1 2% 3% 14% 11% 16% 14% 20% 39% 6% 6% 23% 22% 9% 16% 14% 35% 6% 23% 21% Australia Pacific & Asia North America Thermal Coal Metallurgical Coal AN/ANFO Bulk Emulsion Iron O
Slide 32: Australia Pacific & Asia
SUPPLEMENTARY INFORMATION Australia Pacific & Asia Market conditions EBIT ($M) External revenue ($M) • High commodity prices and strong mining activity 373 2,051 2,106 • Growth in metals sector, particularly iron ore, gold and copper 202 280 1,066 1,163 • Growth in coal demand from Indonesia 170 1,1
Slide 33: North America
SUPPLEMENTARY INFORMATION North America Market conditions EBIT ($M) External revenue ($M) • Strong commodity demand, particularly Q&C and thermal coal 165 1,260 1,230 • Mining activity continuing to recover towards pre COVID-19 levels 69 108 581 654 • Supply chain challenges across all sectors inclu
Slide 34: Latin America
SUPPLEMENTARY INFORMATION Latin America Market conditions EBIT ($M) External revenue ($M) • Mining activity recovering, driven by stronger commodity prices 38 957 856 • Increased ammonia and sea freight costs 16 29 526 423 • Russia export ban and Russia-Ukraine conflict impacted trade 16 668 22 24 •
Slide 35: Europe, Middle East & Africa
SUPPLEMENTARY INFORMATION Europe, Middle East & Africa Market conditions EBIT ($M) External revenue ($M) • Russia export ban and Russia-Ukraine conflict significantly disrupting AN 64 883 801 and energy trade 412 399 • 31 Strong copper and gold mining activity in Africa 25 • Improvements in quarry a
Slide 36: Orica Monitor
SUPPLEMENTARY INFORMATION Orica Monitor Market conditions EBIT ($M) External revenue ($M) • Strong demand by mines globally to increase and renew their slope 31 115 monitoring equipment 94 18 20 • Significant growth in Brazil for tailings dam and open-pit monitoring 42 63 systems 11 15 57 13 52 52 9
Slide 37: Foreign exchange translation
SUPPLEMENTARY INFORMATION Foreign exchange translation Basket of 41 currencies translated to Australian Dollar (AUD) earnings Key currency movements 1H22 1H21 Var 31 Mar 2022 31 Mar 2021 Var Currency Average rates Spot rates CAD – Canadian Dollar 0.9173 0.9657 (5%) 0.9375 0.9592 (2%) USD – US Dollar
Slide 38: Debt profile
SUPPLEMENTARY INFORMATION Debt profile Drawn debt maturity profile ($M) • Shortly after 31 March 2022, Orica completed a $299 million refinancing of Average tenor at March 2022 – 3.8 years (drawn debt: 4.7 years) committed bank facilities on 5 April 2022 1,000 • The refinancing included a $40 millio
Slide 39: Environmental and decommissioning provisions
SUPPLEMENTARY INFORMATION Environmental and decommissioning provisions As at 31 March ($M) 2022 20211 Botany groundwater remediation 196 212 Botany hexachlorabenzene (HCB) waste 25 29 Burrup decommissioning 38 44 Initiating systems network optimisation 24 27 Deer Park remediation 8 12 Yarraville rem
Slide 40: Significant items
SUPPLEMENTARY INFORMATION Significant items Gross Net Half year ended 31 March 2022 ($M) (before tax) (after tax) Impairment expense (156) (158) • Impairment of assets of the Russia business (78) (80) • Impairment of assets of the Turkey business (33) (33) • Impairment of Goodwill in EMEA segment (4
Slide 41: Non-IFRS reconciliations
SUPPLEMENTARY INFORMATION Non-IFRS reconciliations 2022 2021 Variance Half year ended 31 March ($M) Restated 1 Statutory net profit / (loss) after tax (85) 79 Add back: Individually significant items after tax1 214 (3) Underlying profit after tax1 129 76 71% Adjust for the following: Net financing c
Slide 42: Definitions
SUPPLEMENTARY INFORMATION Definitions Term Definition AN Includes ammonium nitrate prill and solution as well as emulsion products including bulk emulsion and packaged emulsion Capital expenditure Comprises spend on property, plant and equipment and intangible assets, on an accruals basis for FY20 o