Slide 1: 2012 Full Year Results
For personal use only 2012 Full Year Results Monday 12th November 2012 Ian Smith – Managing Director and CEO, Orica Limited Noel Meehan – Executive Director Finance, Orica Limited
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: Presentation Outline
Presentation Outline For personal use only Overall Performance Ian Smith Financial Performance Noel Meehan Balance Sheet & Cashflow Noel Meehan Projects Update Ian Smith Structure and Strategy Ian Smith Slide 2
Slide 4: Safety Performance
Safety Performance For personal use only Orica's historical safety performance 0.7 5 4.5 0.6 4 0.5 3.5 Injury Frequency Rate Severity Index 3 0.4 0 1 1 2.5 0.3 2 0.2 1.5 1 0.1 0.5 0 0 2010 2011 2012 LTIFR AWRCR Severity Index 1. AWRCR: All Worker Recordable Case Rate, total number of recordable case
Slide 5: Greenhouse Gas Emission Reduction
Greenhouse Gas Emission Reduction For personal use only Abatement • Abatement technology has now been installed on nitric acid plants at Kooragang Island, Yarwun, Bontang and Carseland. This will reduce greenhouse gas emissions equivalent to removing 150,000 cars from the road. Mineral Carbonation •
Slide 6: Group Financial Performance
Group Financial Performance For personal use only Full year ended 30 September (A$M) 2012 2011 % Statutory profit after tax 402.8 642.3 (37.3) Individually material items 247.4 - Underlying profit after tax 1 650.2 642.3 1.2 2012 underlying net profit in line with guidance3 Earnings per share (
Slide 7: Minova Asset Impairment
Minova Asset Impairment For personal use only Full year ended 30 September (A$M) 2012 Individually material items 247.4 Comprising North America 307.2 China 20.0 Minova Group 40.0 Total Pre Tax 367.2 Tax Effect (119.8) Total After Tax 247.4 Slide 6
Slide 8: Group EBIT
Group EBIT For personal use only A$M 1,250 31 (69) EBIT 1% 1,200 73 1,150 (52) 77 (40) 1,100 (25) 1,050 1,028 1,023 1,000 950 900 850 800 2011 EBIT Margin Volume Land Sales / Kooragang FX Fixed Costs / Ammonia / AN 2012 EBIT Improvement Other Island Shutdown Depreciation Lag Stronger demand from m
Slide 9: Orica Mining Services
Orica Mining Services Sales $4,377M; EBIT $790M; Average Operating Net Assets $3,517M For personal use only A$M 1,000 28 (66) EBIT 3% 60 950 (47) 900 74 (29) 850 (25) 817 (22) 800 790 891.0 817.0 750 700 2011 EBIT Volume Net Price Land Sales / Kooragang FX Depreciation / Ammonia / AN Fixed Costs 2
Slide 10: Minova
Minova Sales $854M; EBIT $109M; Average Operating Net Assets $1,295M For personal use only A$M 130 EBIT 4% 3 (3) 120 6 (9) 7 109 110 105 100 90 80 70 2011 EBIT Volume Efficiency Other FX Net Price 2012 EBIT Higher volumes in Australia and CIS, partly offset by Unfavourable impact from foreign
Slide 11: Chemicals
Chemicals Sales $1,593M; EBIT $211M; Average Operating Net Assets $832M For personal use only A$M 240 EBIT 8% 230 26 (2) (7) 220 3 (3) (2) 211 210 200 196 190 180 170 160 2011 EBIT Mining Chemicals Watercare General Productivity Kooragang Island FX 2012 EBIT Chemicals impact Strong demand for so
Slide 12: Cash Flows
Cash Flows For personal use only Full year ended 30 September (A$M) 2012 2011 $ Net operating cash flows 544 758 (214) Net investing cash flows (674) (766) 92 Net financing cash flows 33 19 14 TOTAL (97) 11 (108) Operating Cash Flows • impacted by Kooragang Island, higher raw material costs
Slide 13: Rolling TWC to Rolling Sales %
Rolling TWC to Rolling Sales % For personal use only 20.0% 19.0% 18.0% 17.0% Rolling TWC / Sales % 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% HY03 FY03 HY04 FY04 HY05 FY05 HY06 FY06 HY07 FY07 HY08 FY08 HY09 FY09 HY10 FY10 HY11 FY11 HY12 FY12 Disciplined management of TWC maintained Slide 12
Slide 14: Investing Activities
Investing Activities For personal use only ACT EST Capital Expenditure 1 2012 2013 Sustenance 234 300 Expansion 395 280 Burrup 2 41 200 Spend to ACT EST Target Major Capital Projects 1 Approved date 2012 2013 Completion HONCE 108 69 18 36 2013 FY Burrup 3 USD 470 41 41 200 2016 FY 1. Excludes capita
Slide 15: Capital Management – Key Measures
Capital Management – Key Measures For personal use only Full year ended 30 September 2012 2011 Net Debt (A$M) 2,299.2 1,408.1 Net Interest Expense (A$M) 128.2 123.5 Interest Cover (times)1 8.0 8.3 Operating Cash ($) 544.1 758.2 Cash Conversion (%) 72.0% 81.0% Rolling TWC to Rolling Sales (%) 13.3% 1
Slide 16: Drawn Debt Maturity Profile
Drawn Debt Maturity Profile For personal use only A$M 600 500 400 300 200 100 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2023 2026 2031 Average tenor of drawn debt of 5.2 years Slide 15
Slide 17: 2013 Hedging
2013 Hedging For personal use only Hedging position for 2013 as at November 2012 (major currencies only): Foreign currency Exposure * Effective hedged % • USD 60% 33% • CAD 10% 26% • NOK 7% 22% • NZD 5% 30% Total currency exposure 30% * Estimated net of all long and short positions in that currency
Slide 18: Environmental Provisions
Environmental Provisions For personal use only Environmental Spend (A$M) ACT 2012 EST 2013 EST 2014 EST 2015 Major environmental spend: Botany Groundwater remediation1 12 13 13 13 Botany HCB remediation2 27 12 5 2 Botany Mercury remediation 7 8 9 - Other 5 13 25 23 Total environmental spend 51 46 52
Slide 19: Projects Update
Projects Update For personal use only Slide 18
Slide 20: Study and Project Pipeline
Study and Project Pipeline For personal use only Concept & PFS Feasibility Execution Operation Bontang AN Plant Kurri Kurri Emulsion Plant Pt Hedland Emulsion Plant HONCE Initiation Plant Sustain Optimova Burrup AN Plant Kooragang Island AN Plant Future Cyanide Capacity South American AN Plant Yarwu
Slide 21: Bontang Ammonium Nitrate Plant
Bontang Ammonium Nitrate Plant For personal use only • Beneficial production from 1 July, 2012 with 60kt manufactured in 2012 • Proven ability to manufacture to nameplate capacity and product quality within specification • Final project cost below US $500 M • Addressing distribution and storage bott
Slide 22: HONCE Initiating Systems
HONCE Initiating Systems For personal use only • Construction is expected to be complete early in CY 2013, with commissioning to occur progressively alongside construction • Operational team substantially recruited with training underway • Key personnel from Weihai have been transferred to support o
Slide 23: Project Sustain
Project Sustain For personal use only Environment Health and Community Hygiene Safety Project Risk Sustain SHEC and Risk Social Industry Leader Responsibility Equipping Orica to be a socially responsible company through being a global innovator and leader in Safety, Health, Environment, Community &
Slide 24: Project Sustain
Project Sustain For personal use only All agreed regulatory projects at Yarwun and Kooragang Island are either completed or progressing in accordance with the timetable agreed with regulatory authorities. • All agreed improvement projects at Yarwun have been completed • Kooragang Island improvement
Slide 25: Minova to Optimova
Minova to Optimova For personal use only The Minova business :- • Provides a pathway to growth through bundling of solutions to underground customers (a market that currently constitutes less than 15% of Mining Services revenue); • Good Cash Conversion at around 96%; but • Needs to be repositioned f
Slide 26: Optimova
Optimova For personal use only 1. The Project needs to preserve market share against fierce competition while reducing our cost base. 2013 FY is particularly challenging with EBIT expected to be approximately 20% less than FY 2012. 2. Despite this, we expect strong growth in sales over 5 years with
Slide 27: Optimova: USA Coal vs Gas Price
Optimova : USA Coal vs Gas Price For personal use only 60% $6 50% $5 % of US Energy generated by Coal US Natural Gas price ($/GJ) 40% $4 30% US Gas Prices 32.4% $3 April 20 2012 $1.82 Oct 31 2012 $3.50 20% Oct 31 2011 $3.66 $2 Oct 31 2010 $3.42 $2.14 Oct 31 2009 $4.11 Oct 31 2008 $6.18 10% $1 Six Mo
Slide 28: Kooragang Island Expansion
Kooragang Island Expansion For personal use only • Project feasibility work is complete and all statutory planning approvals have been obtained • An engineering pathway for construction has been confirmed and a detailed technical appraisal has been presented to the Board • Most long lead items have
Slide 29: Burrup JV
Burrup JV For personal use only • NW Iron Ore = geographic & commodity diversification Announced Iron Ore Production Increases • Site preparation activity commenced North West Regions (mtpa) in October 2012 900 • Unique project & capital structure that 15% CAGR 800 reduces capital risk:- 700 • $110M
Slide 30: Security of Supply
Security of Supply For personal use only Over 50% of our mining related EBIT is generated within the area shown in the adjacent map. Security and flexibility of supply is supported by:- 1. four large AN prill plants (post Burrup) 2. numerous emulsion plants 3. extensive storage capacity & locations
Slide 31: Structure and Strategy
Structure and Strategy olR'QA For personal use only aslryC¡ ar+. akl.¡d _ (¡ñdqd o! 4d&51* aMúryd. au a aN 9 cala aouH Mlnbr¡gú.a4 s¡nb oðro aftñl$l anbr¡e.¡b:oÞPfu [úduoa EurupO'kW'nd 4b.." Êq{nbEa a bndo aad Ad.l. s a Nowr. ákP* M. P.* V.rnvillè -15,000 Employees Operations in 50 countries Gustome
Slide 32: Business Model
Business Model For personal use only Global leader in the provision of high Customers service, critical consumables to the & Marketing mining & infrastructure markets Differentiated customer, product, service & solution Sales & Service offerings Low cost manufacturing & supply chain underpinned by M
Slide 33: New Structure, Refreshed Strategy
New Structure, Refreshed Strategy For personal use only Old Strategic Nuance New Strategic Nuance 1. Internal focus 1. External relationship focus – customers, suppliers & governments 2. Business unit primacy 2. Strong functional accountability 3. Product innovation 3. Customer driven solutions and
Slide 34: New Structure, Refreshed Strategy
New Structure, Refreshed Strategy For personal use only 1 Provision of differentiated products, services and solutions STRATEGIC DIRECTION which enhance value for mining customers across the globe CORPORATE supported by . . . 2 Reliable low-cost multi- 3 4 Development and Capital efficient JVs or so
Slide 35: New Structure, Refreshed Strategy
New Structure, Refreshed Strategy For personal use only Differentiated Differentiated services led model Orica Services Competitor Basic/limited Competitor Competitor Competitor Competitor Competitor Competitor Competitor Manufacturing led model Drive to Willing to make internally source externally
Slide 36: Enabling Orica's Ability to Build Margin
Enabling Orica’s Ability to Build Margin For personal use only Complete Structure The new structure; with centralised functional support/services that assist the value chain steps of Research and Development, Manufacturing and Mining Services and Chemicals; will enable Orica to grow without the need
Slide 37: Manufacturing Excellence
Manufacturing Excellence For personal use only A deep dive has been performed into Kooragang Island operations • Operational and process improvements identified for the next 12 months • Plant improvements implemented to reduce the risk of major incidents Results already achieved include: • All maint
Slide 38: Unique Profile and Opportunities
Unique Profile and Opportunities For personal use only Profile • Global market leadership • Strong manufacturing position • Attractive industry fundamentals • Multiple growth opportunities • Ground breaking technology Opportunities • Growth in commodity volumes, driven by industrialisation and urban
Slide 39: Supplementary Information
Supplementary Information For personal use only
Slide 40: EBIT Contribution by Business Platform
EBIT Contribution by Business Platform1 For personal use only September 2011 September 2012 Chemicals Chemicals Group Group 18% 19% Minova 9% Minova 10% Mining Mining Services Services 71% 73% 1. Excludes corporate centre and other support costs Slide 39
Slide 41: EBIT Contribution by Geography
EBIT Contribution by Geography For personal use only September 2011 September 2012 Other Other Europe Europe 2% 1% 10% 14% Latin America 12% Latin America 10% Australia Australia 50% 52% North America North America 13% 13% Asia Asia 10% New Zealand 7% New Zealand 3% 3% Slide 40
Slide 42: Gross Sales by Geography
Gross Sales by Geography For personal use only September 2011 September 2012 Other Other Europe 2% Europe 2% 11% 10% Australia Australia Latin America 35% 35% Latin America 15% 16% North America New Zealand North America New Zealand 18% 3% 17% 3% Asia Asia 16% 17% Slide 41
Slide 43: Gross Margin Growth
Gross Margin Growth 1 For personal use only A$M 3,000 +4.6% +11.4% -0.8% +2.4% +18.3% 2,500 +19.0% 2,000 +9.2% +6.3% +12.7% 1,500 1,000 500 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Compound average growth rate since 2003 is 9.0% 1. Gross margin prepared on a continuing operations basis and
Slide 44: Net Profit After Tax
Net Profit After Tax 1 For personal use only A$M 700 +4.6% +12.9% -5.0% +1.2% DLX 600 +15.0% +31.0% 500 400 +11.8% +20.5% +4.4% 300 200 100 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Compound average growth rate since 2003 is 10.2% 1. Orica net profit after tax before individually material it
Slide 45: EBIT by Business
EBIT by Business For personal use only Mining Services 1 Chemicals Minova 900 25% 250 16% 160 20% 800 140 700 20% 200 16% 12% 120 EBIT MARGIN EBIT MARGIN EBIT MARGIN 600 EBIT A$M EBIT A$M EBIT A$M 15% 150 100 12% 500 8% 80 400 100 8% 10% 60 300 4% 40 200 5% 50 4% 100 20 0 0% 0 0% 0 0% 2009 2010 2011
Slide 46: Orica Mining Services
Orica Mining Services For personal use only Full year ended 30 September (A$M) 2012 2011 % Sales 4,377.1 3,938.0 11.2 EBITDA 961.4 965.7 (0.4) EBITDA margin (%) 22.1% 24.5% (9.8) EBIT 789.7 817.0 (3.3) EBIT margin (%) 18.0% 20.7% (13.0) Slide 45
Slide 47: Orica Mining Services by Geography
Orica Mining Services by Geography For personal use only Australia/Asia North America 500 140 120 400 100 EBIT A$M EBIT A$M 300 80 200 60 40 100 20 0 0 2009 2010 2011 2012 2009 2010 2011 2012 1st Half EBIT 2nd Half EBIT 1st Half EBIT 2nd Half EBIT Latin America EMET 140 100 120 80 100 EBIT A$M EBIT
Slide 48: Minova
Minova For personal use only Full year ended 30 September (A$M) 2012 2011 % Sales 854.1 821.9 3.9 EBITDA 138.6 133.6 3.8 EBITDA margin (%) 16.2% 16.2% - EBIT 109.0 105.1 3.7 EBIT margin (%) 12.8% 12.8% - Slide 47
Slide 49: Chemicals
Chemicals For personal use only Full year ended 30 September (A$M) 2012 2011 % Sales 1,592.8 1,510.0 5.5 EBITDA 254.4 235.4 8.1 EBITDA margin (%) 16.0% 15.6% 2.6 EBIT 211.2 196.0 7.8 EBIT margin (%) 13.3% 13.0% 2.3 Slide 48
Slide 50: Corporate Centre and Other Support Services
Corporate Centre and Other Support Services For personal use only Full year ended 30 September (A$M) 2012 2011 $ Corporate centre costs (41.5) (42.0) 0.5 Other support costs (45.8) (47.8) 2.0 Total corporate costs (87.3) (89.8) 2.5 Corporate centre and other support costs • In line with prio
Slide 51: Cash Conversion
Cash Conversion For personal use only Full year ended 30 September (A$M) 2012 2011 EBITDA 1,274.0 1,252.5 TWC movement (121.9) 2.8 Sustenance (234.2) (240.9) Cash Conversion 917.9 1,014.4 Cash Conversion % 1 72.0% 81.0% 1. Cash conversion % impacted by the $90M EBITDA effect of the Kooragang Island
Slide 52: Net Interest Expense
Net Interest Expense For personal use only Full year ended 30 September (A$M) 2012 2011 $ Net interest expense 128.2 123.5 4.7 Comprising: Interest on net debt 159.8 147.1 12.6 Add: Unwinding of discount on provisions 5.9 12.7 (6.8) Add: Major external finance leases 0.6 1.1 (0.5) Less: Ca
Slide 53: Interest Cover
Interest Cover For personal use only Full year ended 30 September (A$M) 2012 2011 $ Financial expense 1 161.1 155.9 5.2 Financial income (32.9) (32.4) (0.5) Net financing costs 128.2 123.5 4.7 EBIT 1,022.6 1,028.3 (5.7) Interest Cover (times) 8.0 8.3 (0.4) 1. Financial expense in 2012 in
Slide 54: Impact of Step-Up Preference Securities – Earnings Per Share
Impact of Step-Up Preference Securities (SPS) – Earnings Per Share For personal use only Reported per Accounts A$M Profit after income tax expense 1 671.2 Less: Net profit attributable to non controlling interests (21.0) After tax distributions to SPS holders 2 (8.9) Adjusted net profit 641.3 Weight
Slide 55: Debt Profile (as at September 2012)
Debt Profile (as at 30 September 2012) For personal use only Drawn Debt Debt Maturity Profile Other, $24M A$M Drawn Undrawn Total Bank Loans, < 1 year 346 588 934 $743M 1 – 2 years 512 124 636 2 – 5 years 909 794 1,703 USPP, $1,386M > 5 years 768 - 768 Export Finance, $90M Total 2,535 1,506 4,041 Co
Slide 56: Non IFRS Information Reconciliation
Non IFRS Information Reconciliation For personal use only Full year ended 30 September (A$M) 2012 2011 % Statutory profit after tax 402.8 642.3 (37.3) Add back: Individually material items after tax 247.4 - Underlying profit after tax 650.2 642.3 1.2 Adjust for the following: Net financing cost
Slide 57: Non IFRS Disclosures and Definitions
Non IFRS Disclosures and Definitions For personal use only Term Definition Net profit for the period attributable to shareholders of Orica Limited as disclosed in note 2 to the Orica Annual Statutory profit after tax Report (Segment report). Profit after income tax expense before individually materi