Dyno Nobel Limited · ASX:DNL
Dyno Nobel — Incitec Pivot — H1 2010 Earnings Presentation
39 slides from Dyno Nobel's earnings presentation, May 10, 2010
Slide 1: Incitec Pivot Limited 2010 Interim Results
Incitec Pivot Limited 2010 Interim Results 10 May 2010
Slide 2: 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 3: Presentation outline
Presentation outline IPL Group performance James Fazzino Managing Director and CEO Strategy James Fazzino Business Unit performance James Fazzino • Explosives • Fertilisers Capital Management Frank Micallef Chief Financial Officer Outlook James Fazzino Summary James Fazzino 3
Slide 4: James Fazzino, Managing Director & CEO
James Fazzino Managing Director & CEO
Slide 5: IPL Group performance Overview
IPL Group performance Overview NPAT excluding IMIs ↓ 14% to $146.2M Explosives business – EBIT 3% ↑ Asia Pacific Business – improved performance Challenging market conditions persist in North America Velocity program on track Higher A$ Fertiliser business – EBIT 32% ↓ Volume recovery in domestic dis
Slide 6: IPL Group financial performance: Results summary
IPL Group financial performance Results summary Half year ended 31 March (A$M) 2010 2009 Change Revenue 1,236.4 1,708.0 (28%) EBIT(1) 230.1 272.2 (15%) NPAT(2) – excluding individually 146.2 169.8 (14%) material items Operating cashflow 79.2 (112.8) 170% Dividends per share (cents)(3) 1.8 2.1 (14%)
Slide 7: IPL Group performance: NPAT waterfall
IPL Group performance NPAT waterfall 1H 09 : A$169.8M v 1H 10 : A$146.2M 180.0 169.8 160.0 20.2 146.2 140.0 28.6 120.0 100.0 20.5 A$M 80.0 50.7 60.0 40.0 (133.6 ) 18.1 20.0 - (28.1 ) I's ty I's ) s r h ) as (1 he (2 t ba ci er IM IM ic es ot e lo an -F im er cl lc Ve ic x, or m ex ex pt ix Pr ta M l
Slide 8: Strategy
Strategy DYNO fa Dyno Nobel seunemcas® Incitec Pivot L a mM I te d International
Slide 9: Strategy remains focused
Strategy remains focused 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 fertiliser
Slide 10: IPL Group performance: Balance of revenue & earnings
IPL Group performance Balance of revenue & earnings Diverse End-market exposures From a common nitrogen core Geographically spread 1H 2010 Revenue - A$1,236.4M 1H 2010 EBIT - A$230.1M 1H 2010 Revenue - A$1,236.4M Diverse markets deliver sound earnings 10
Slide 11: Business alignment to strategy
Business alignment to strategy Americas Largest explosives market in the world Explosives – Industry size builds scale and expertise, which can be leveraged in other markets – Provides base scale across the broader business (eg. Initiating Systems Manufacturing) Asia Pacific Growth engine of the IPL
Slide 12: Strategic priorities
Strategic priorities What we promised What we delivered Value – Zero Harm • 1H 2010 TRIFR(1) reducing to 1.30 from at the core 1.37 in 1H 2009 • 36 recordable cases compared with 53 1H 2009 • 90% sites recordable case free (up from 80% 1H 2009) Note: On 5 May, 2010 an employee fatality occurred in Q
Slide 13: Strategic priorities
Strategic priorities What we promised What we delivered • Improve plant and supply • Phosphate Hill / Mt Isa planned shut chain reliability completed • Cheyenne uptime • Growth from the nitrogen • Moranbah construction in progress core – Moranbah • 90% of plant sold out • Project “confidently in con
Slide 14: Moranbah update
Moranbah update Construction • Engineering largely complete • Full site mobilised 5 May 2010 • Peak workforce 4Q 2010, 1Q 2011 • 35% complete end March 2010 • $333M spend of $935M budget • Production on track for end Q1 2012 Customers • 90% sold out • Confident 100% sold out prior to commissioning C
Slide 15: Explosives
Explosives DY N © Incitec Pivot Dyno Nobel seunemcas® Incitec Pivot | mM i e 1 International
Slide 16: Explosives scorecard: Results summary
Explosives scorecard Results summary External market North American US$ revenues down 19% FX impact on translation of US earnings $24.9M Internal execution Velocity: US$25.9M cumulative EBIT benefits & US$7.3M in cash Plant reliability – Cheyenne uptime – QNP joint venture uprate benefits delivered
Slide 17: Explosives performance: EBIT waterfall
Explosives performance EBIT waterfall - 1H 09: A$128.9M v 1H 10: A$133.2M 180.0 6.2 20.5 160.0 28.6 140.0 133.2 128.9 (29.4) 11.9 115.9 (8.6) 120.0 100.0 (24.9) A$M 80.0 60.0 40.0 20.0 - IT IT 09 ty ng ct e e e er EB EB ic as ci 20 pa tim ci th Pr lo le ur Im 1H 09 10 /o up Ve re re so lim 20 20 FX
Slide 18: Coal market: AN Volumes
Coal market Destocking in 1H, inventories approaching average US Coal Market Q1 2009 Q2 2009 ANVolumes Q1 2010 Q2 2010 Oct Nov Dec Jan Feb Mar Coal Stocks at Power Stations: Sept 09 83 days Feb 10 59 days 3yr average 50 days Drawdown on inventories during winter in the US 18
Slide 19: US quarry and construction
US quarry and construction Leading share in US stone industry US Stone Industry Q1 2009 AN Volume Q1 2010 Q2 2009 Q2 2010 Oct Nov Dec Jan Feb Mar Quarter 1 Quarter 2 Dyno Nobel Volume ↓ 35% Dyno Nobel Volume ↓ 1% Industry Volume ↓ 26% Industry Volume ↓ 14% 19
Slide 20: Fertilisers
Fertilisers DYNO fa Dyno Nobel seunemcas® Incitec Pivot L im ited International
Slide 21: Fertilisers scorecard: Results summary
Fertilisers scorecard Results summary External market FX and commodity prices Volume and margin recovery to normal levels in distribution business Internal execution More ammonium phosphate production for domestic sale (mostly benefits 2H 2010) Reliability issues at Phosphate Hill addressed: – plann
Slide 22: Fertilisers EBIT waterfall
Fertilisers EBIT waterfall - 1H 09: A$143.3M v 1H 10: A$96.9M 160.0 143.3 140.0 120.0 14.4 96.9 100.0 (50.1) 50.7 A$M 80.0 60.0 (36.9) 40.0 15.2 20.0 (39.7) 0.0 1H 2009 EBIT FX Impact DAP FOB price Urea FOB price Freight Volume/mix Input 1H 2010 EBIT costs/other 22
Slide 23: Di-Ammonium Phosphate (DAP)
Di-Ammonium Phosphate (DAP) DAP Prices 1H Spot $1,100 Q1 2009 - $519 DAP FOB Sale Price - USD Q2 2010 - $449 $500 $460(1) $400 $300 Q2 2009 - $351 Q1 2010 - $315 $200 Oct Nov Dec Jan Feb Mar 6th May 1H 2H FY 2009 US$455 US$310 US$366 2010 US$371 A$M impact @ 2009 FX rate: A$36.9M (1) Fertilizer Week
Slide 24: Urea
Urea Urea Price 1H Spot $750 UREA FOB Sale Price - USD Q1 09 - $708 $650 Q1 2009 - $708 $450 Q2 2010 - $305 Q2 10 - $305 $350 Q1 2010 - $261 $267(1) $263 Q1 10 - $261 $250 Q2 2009 - $303Q2 09 - $303 $150 Oct Nov Dec Jan Feb Mar 6th May 1H 2H FY 2009 US$505 US$275 US$339 2010 US$283 A$M impact @ 2009
Slide 25: Frank Micallef, Chief Financial Officer
Frank Micallef Chief Financial Officer
Slide 26: Capital Management
Capital Management ely SouthernCross } Dyno Nobel Gamma Souter Incitec Pivot
Slide 27: Capital management outcomes – Net debt
Capital management outcomes – Net debt Net debt reduced by A$187M in 1H 2010 - from A$1,464M to A$1,277M and by A$829M since March 2009: Positive operating cash flow for 1H 2010 $79.2M Working capital management in both fertilisers and explosives Sustenance & turnaround capex tightly controlled US d
Slide 28: Capital management initiatives - Funding
Capital management initiatives - Funding Funding Initiatives – Increased tenor and diversity of debt: 144A / Regulation S Bond issue: US$800M; 10 years Diversity of funding Tenor of drawn funds – Average 7 years US Debt strategy tenor and diversity of funding has been delivered as promised 28
Slide 29: Capital management – Headroom & credit metrics
Capital management – Headroom & credit metrics Net debt at 31 March 2010 A$Bn Net debt 1.28 Headroom including cash 1.14 Investment grade credit metrics March 2010 Target range Net debt / EBITDA(1) 1.9x < 2.5x Interest cover(2) 9.5x >6.0x strong headroom and credit metrics (1) Based on last 12 month
Slide 30: Capital management – Dividends
Capital management – Dividends Dividend policy • 20 - 40% pay-out of NPAT pre IMIs subject to franking capacity, capital requirements and other relevant factors 2010 Interim dividend • 1.8 cents per share, unfranked, to be paid 6 July 2010 (record date 20 May 2010) • Dividend Reinvestment Plan will
Slide 31: Transactional hedging
Transactional hedging 2H 2010 ammonium phosphates and urea sales • 95% hedged @ no worse than 89.5 cents FY 2011 ammonium phosphates and urea sales • 60% hedged @ no worse than 91 cents, fully participating down to 80 cents and partially participating below 80 cents 31
Slide 32: James Fazzino, Managing Director & CEO
James Fazzino Managing Director & CEO
Slide 33: 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 and plant reliability continued focus on controllable
Slide 34: Summary
Summary Diverse markets delivered a sound result, despite the higher A$, lower global fertiliser prices, and the US economy which was at its cyclical bottom in the 1H Velocity program on track Improved plant reliability - global risk and reliability focus Significantly improved cash flows and net de
Slide 35: Questions?
Questions? eel SouthernCross } Dyno Nobel [aly 522 em Incitec Pivot Limitec
Slide 36: Appendix 1: IPL history & evolution
Appendix 1: IPL history & evolution Corporate History Demerger of Antecedent Incitec fertiliser Appointment of business from Merger with Moranbah companies of James Fazzino Orica’s Incitec Acquisition of construction Incitec SCF acquisition as MD & CEO Industrial Fertilizers Ltd Dyno Nobel commenced
Slide 37: Appendix 2: FX and commodity pricing
Appendix 2: FX and commodity pricing Commodity Prices A$M DAP US$371 vs US$455 (36.9) Urea US$285 vs US$505 (39.7) Nitrogen – US Ag business (8.6) Sulphur/other 11.4 Freight (urea & DAP) 15.2 (58.6) FX Rate DAP 71.9 vs 89.8 (39.8) Urea (10.3) Translational FX 90.7 vs 66.8 (24.9) (75.0) FX & Commodit
Slide 38: Appendix 3: Capital management - Interest cost
Appendix 3: Capital management - Interest cost Half year ended 31 March 2010 2009 Change (A$M) Total borrowing costs 41.7 65.5 36% Less back unwinding of (5.6) (4.1) (37%) discount on provisions Interest cost 36.1 61.4 41% Average net debt during the 1,413 2,225 36% period Average interest rate 5.1%
Slide 39: Appendix 4: 2010 full year EBIT sensitivities
Appendix 4: 2010 full year EBIT sensitivities Urea – Middle East Granular Urea (FOB)(1) +/- US$10/t = +/- A$4.6M DAP – Di-Ammonium Phosphate Tampa (FOB)(2) +/- US$10/t = +/- A$10.8M FX – transactional (DAP & Urea)(3) +/- 1 cent = A$5.8M FX – translation of Explosives US$ earnings(4) +/- 1 cent = A$0