Orica Limited · ASX:ORI
Orica — Investor Presentation (March 2018)
29 slides from Orica's investor presentation, March 2018
Slide 1: Orica Investor Presentation March 2018
ORICA INVESTOR PRESENTATION March 2018 Vince Nicoletti, Chief Financial Officer
Slide 2: Disclaimer
DISCLAIMER 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 intended to be used a
Slide 3: Agenda
AGENDA 1. Orica Introduction 4 2. Key Strategic Priorities 12 3. Financial Performance 20 4. Update and Outlook 25 3 © Orica Limited Group
Slide 4: 1. Orica Introduction
1. ORICA INTRODUCTION
Slide 5: Global leader in mining and civil blasting
GLOBAL LEADER IN MINING AND CIVIL BLASTING Scale and efficiency that comes from being the leading supplier of commercial Economies of scale explosives and blasting systems to the mining and infrastructure markets globally Leading brand and Leading supplier of commercial explosives globally with
Slide 6: True global footprint
TRUE GLOBAL FOOTPRINT • Operates in over 50 countries and customers in more than 100 countries worldwide 140+ YEARS of experience and innovation No.1 GLOBAL SUPPLIER of commercial explosives 11,500+ EMPLOYEES serving customers across more than 100 countries 1,500 BLASTS PER DAY on our customer sites
Slide 7: Global market leader
GLOBAL MARKET LEADER Orica’s global leadership is a key differentiator Unrivalled licensing, scale, facility footprint, and market presence to service large customers in multiple jurisdictions regionally and globally Facility proximity to customer operations provide material cost advantages and
Slide 8: Safety is Orica's top priority
SAFETY IS ORICA’S TOP PRIORITY Safety performance Safety is a Core Value % Total Recordable Injury Frequency Rate¹ Strongly aligned to our customers’ focus on safety Total Recordable Injury Frequency1 at comparable industry benchmark Major Hazards Initiative (MHI) Company-wide identification o
Slide 9: Flexible manufacturing and sourcing capability
FLEXIBLE MANUFACTURING AND SOURCING CAPABILITY Orica complements own manufacturing capabilities with flexible global sourcing arrangements: • Highly disciplined approach to the management of the company’s AN manufacturing capacity • c.50% AN volume globally, strategically 3rd party sourced to meet s
Slide 10: Vertical integration
VERTICAL INTEGRATION Bringing together advanced manufacturing capability, global supply chain, operational capability and technical excellence, Orica is uniquely positioned to add value for our customers Manufacturing Logistics Operational Capability Technical Excellence Mature and highly Integrated
Slide 11: Diversified global business
DIVERSIFIED GLOBAL BUSINESS Geographic portfolio By commodity By product/service offering % of FY17 revenue¹ % of FY17 revenue¹ % of FY17 revenue¹ 2% 9% 9% 16% 17% 26% 30% AN/ANFO Australia Pacific & Thermal Coal 13% 19% Bulk Emulsion Indonesia North America Coking Coal Packaged Products Iron Ore In
Slide 12: 2. Key Strategic Priorities
2. KEY STRATEGIC PRIORITIES
Slide 13: Orica's digital growth strategy
ORICA'S DIGITAL GROWTH STRATEGY ENABLING STATIC TO DYNAMIC DRILL AND BLAST OPTIMISATION Understand the resource Design from output INTEGRATE & LEARN Orica’s technical expertise is combined Exploration geotechnical and rock with input data to customise blast sensing data is collated and analysed desi
Slide 14: Continuous improvement on applied technology
CONTINUOUS IMPROVEMENT ON APPLIED TECHNOLOGY Outperform conventional boosters - Delivering improved safety, quality and performance - Australian manufacturing commenced; increased security of supply - Product rationalisation leading to supply chain cost advantage Smart delivery system technology
Slide 15: Step-change technology
STEP-CHANGE TECHNOLOGY Allows modification to the conventional mining sequence only made possible by wireless blasting - Critical pre-cursor to automated blast loading - Unprecedented safety and productivity improvement - Flexible blasting with greater reliability - New long term WebGenTM100 servi
Slide 16: Strategic acquisition - GroundProbe
STRATEGIC ACQUISITION - GROUNDPROBE Acquisition completed mid January 2018 Purchase price A$205 million plus adjustments Industry leading provider of geotechnical slope stability monitoring solutions for the mining industry Highly complementary to Orica’s core business operating in an adjace
Slide 17: Net sustainable benefits
NET SUSTAINABLE BENEFITS SUSTAINABLE SUPPLY CHAIN & COMMERCIAL EFFICIENCIES $127 million in net benefits offset headwinds Supply chain benefits - Product cost savings (input cost margins, volume rebates) 32% - Sourcing and network (utilisation, booster network sourcing) FY17 $127 million 48% - T
Slide 18: Disciplined capital expenditure
DISCIPLINED CAPITAL EXPENDITURE Disciplined approach to capital and investment evaluation drives sustainable reduction Capital Expenditure profile ($m) Capital expenditure 780 prioritised across the group 204 504 443 20% RONA for all new 307 151 75 growth capital projects 306 ~300 - 320 263 150 183
Slide 19: Strategic asset in the Pilbara
STRATEGIC ASSET IN THE PILBARA The Burrup Technical Ammonium Nitrate “TAN” plant is a 30+ year asset located in the Pilbara region of Western Australia - Major Pilbara based iron ore miners are the world’s lowest cost producers - 5 year materials moved growth greater than iron ore production growt
Slide 20: 3. Financial Performance
3. FINANCIAL PERFORMANCE
Slide 21: FY17 results summary
FY17 RESULTS SUMMARY FOCUS AND DISCIPLINED APPROACH DRIVES SOUND RESULT Total AN product volumes of 3.65 million tonnes (pcp: 3.54 million tonnes) Stabilised underlying EBIT of $635 million (pcp: $642 million) - EBIT margin of 12.6% (pcp: 12.6%) Underlying EBITDA of $896 million (pcp: $908 mil
Slide 22: FY17 initiatives offset headwinds
FY17 INITIATIVES OFFSET HEADWINDS Orica Group EBIT $m FY16 to FY17 642 (44) 635 (15) 9 1 19 (18) 13 (29) (59) 127 (54) EBIT FX & Material Pricing Net Explosives Cyanide - Minova Other EBIT 2016 Inflation1on input Business - Volume/ Volume/ EBIT 2017 Overheads costs Improvement Mix/ Mix/ Margin Margi
Slide 23: FY17 regional overview
FY17 REGIONAL OVERVIEW Australia, Pacific & Indonesia North America Latin America Europe, Africa, Asia Revenue by commodity1 9% 11% 7% 14% 4% 21% 5% 19% 19% 4% 8% Thermal coal Thermal coal Thermal coal Thermal coal Coking coal 42% Coking coal Gold Gold Gold Gold Iron ore Iron ore Iron ore Iron ore 2
Slide 24: Historical financials
HISTORICAL FINANCIALS Revenue1 EBIT1 Dividends $m $m cps and payout ratio 900 874 5,739 5,722 5,653 863 85.0% 850 5,092 5,039 15.2% 15.1% 800 12.1% 12.6% 12.9% 58.6% 750 57.7% 50.1% 685 55 56 56 700 47.4% 642 635 650 29 28 600 39 40 40 550 20.5 23.5 500 2013 2014 2015 2016 2017 2013 2014 2015 2016 2
Slide 25: 4. Update and Outlook
4. UPDATE AND OUTLOOK
Slide 26: Update
UPDATE As per ASX announcement 1 March 2018: Global AN product volumes have continued to grow in the first half of the year Several factors will result in reduced EBIT for the first half: First half - Impact of ~$17 million due to unplanned maintenance shutdowns at Kooragang Island and Yarwun pe
Slide 27: FY18 outlook assumptions
FY18 OUTLOOK ASSUMPTIONS Key assumptions for FY18 as disclosed at FY17 Full Year Results in November 2017: Explosives Global AN product volumes in the range of 3.65 million tonnes ± 5% FY17 headwinds to extend into FY18: Headwinds - ~$50 - $55 million impact from contract rollovers and FY17 pric
Slide 28: Looking forward
LOOKING FORWARD We will continue to focus on embedding business initiatives that make Orica a more efficient and effective business Increased investment in our people and technology will consolidate our industry leading position and drive future value for our customers and all of our stakeholder
Slide 29: Definitions
DEFINITIONS Term Definition Ammonium Nitrate volume Includes Ammonium Nitrate (AN) prill and solution and Emulsion products include bulk emulsion and packaged emulsion Net profit after tax. Equivalent to net profit for the period after income tax expense before individually material items attributab