Dyno Nobel Limited · ASX:DNL
Dyno Nobel — Investor Day (September 2019)
87 slides from Dyno Nobel's investor day presentation, Sep 4, 2019
Slide 1: ASX Release: Investor Day Presentation
ASX RELEASE INVESTOR DAY PRESENTATION 4 September 2019 Incitec Pivot Limited (ASX:IPL) will be holding an Investor Day in Brisbane today, where the following presentation will be given. The presentation will commence at 1.30pm AEST and will be webcast via our website at www.incitecpivot.com.au. For
Slide 2: Investor Day
Investor Day 4 September 2019
Slide 3: Table of Contents
Table of Contents Introduction Jeanne Johns Managing Director & Chief Executive Officer Strategic Review & FY 2019 Guidance Manufacturing Excellence Tim Wall President Global Manufacturing & HSEC Questions & Answers Explosives & Technology Overview Jeanne Johns Managing Director & Chief Executive Of
Slide 4: Introduction
Introduction Jeanne Johns Managing Director & Chief Executive Officer
Slide 5: Strong Progress on Strategic Agenda in last 12 months
Strong Progress on Strategic Agenda in last 12 months Strong momentum in HS&E Successfully recontracted Australian volumes Sustained market share growth in Dyno Nobel Americas Manufacturing Excellence strategy implementation underway Premium technology continues to penetrate target markets Robust te
Slide 6: Strategic Review of Fertilisers Business
Strategic Review of Fertilisers Business Logical time to assess the optimal path for the business to realise its potential Fertilisers business has strong platform in the Australian market ▪ In 2018 dispatched 2.2 million metric tonnes of fertilisers to domestic market across range of agricultural s
Slide 7: FY19 Group Guidance
FY19 Group Guidance Revised guidance for FY19 EBIT, reflects lower commodity pricing and operational performance Guidance issued in May 2019 of $370m - $415m, based on disclosed forward commodity price and FX assumptions Updated guidance*: ▪ Applying publicly available actual pricing and FX lowers r
Slide 8: Manufacturing Excellence
Manufacturing Excellence Tim Wall President Global Manufacturing & Corporate HSEC
Slide 9: Manufacturing Excellence Strategy
Manufacturing Excellence Strategy Introduction: Tim Wall, President Global Manufacturing & Corporate HSEC Responsible for Manufacturing (Nitrogen and IS plants) & HSEC Passion for Operations – Safe, Reliable & Competitive Deep experience with 30+ years in Manufacturing roles (line, commercial and co
Slide 10: Manufacturing Overview
Manufacturing Overview Initial observations on manufacturing practices and capability within IPL World-class assets Highly efficient Initiating Systems Plants Capable people Safety focus 9
Slide 11: Manufacturing Excellence Strategy
Manufacturing Excellence Strategy Strategy focus areas Zero Harm People and Culture ▪ Focus on improving Process Safety performance ▪ Apply global best practices, tailored for local ▪ Effective risk management of potential high circumstances consequence incidents ▪ Operations focus with site account
Slide 12: Driving Reliability Improvement
Driving Reliability Improvement Key changes in approach to drive improved reliability Manufacturing organisation restructure ▪ Site leadership accountable for performance ▪ Consistent structure and approach across Manufacturing functions ▪ Regional re-balance of Global Engineering resources ▪ Global
Slide 13: Waggaman Overview
Waggaman Overview Top quartile performance and profitability potential Strategic asset ▪ World-scale plant capable of delivering top-quartile performance ▪ Ammonia supply to Dyno Nobel Americas displaced purchased volumes Plant overview ▪ Commissioned in 2016 ▪ Name plate ammonia capacity of 800k mt
Slide 14: Waggaman Reliability Update
Waggaman Reliability Update Strong progress on reliability improvement plan Critical equipment operating strongly ▪ All major equipment was found to be robust and operating well ▪ Reliability typical of early life stage plant ▪ Failure analysis of each unit in the plant was completed in FY19 ▪ Plant
Slide 15: Phosphate Hill Overview
Phosphate Hill Overview World-scale Ammonium Phosphates operations Strategic asset ▪ Acquired from BHP in 2006 following a divestment of non-core assets ▪ The only Ammonium Phosphates manufacturing plant in Australia ▪ Security of raw material supply ⎻ Located on a world-scale phosphate rock deposit
Slide 16: Phosphate Hill Reliability Update
Phosphate Hill Reliability Update Detailed reliability plan implemented People focus Plant reliability ▪ Adoption of high reliability operations mindset ▪ Known one-off issues with reactor linings addressed ▪ Focus on plant integrity, reliability and maintenance ▪ New strategy for piping in Phosphor
Slide 17: Major Turnaround Approach
Major Turnaround Approach Turnaround improvement and schedule – FY20 / FY21 Global turnaround process owner driving best practice Gibson Island, Queensland St Helens, Oregon sharing & benchmarking Regional teams to support turnaround execution (site responsibility for scope and results) Site ownersh
Slide 18: Manufacturing Excellence Targets
Manufacturing Excellence Targets Reliability targets most appropriate, given plants are fully contracted Targeting upper second quartile reliability Historical Reliability – Ammonia Plants ▪ Several plants operating at top quartile reliability 100 96% ▪ Third quartile historical reliability for ammo
Slide 19: Initiating Systems Manufacturing Capability
Initiating Systems Manufacturing Capability Extensive footprint of world-class Initiating Systems plants Premium Initiating Systems Manufacturing ▪ 10 Initiating Systems plants across 7 Countries ▪ World-class quality and best premium technology Highly efficient manufacturing performance ▪ Across po
Slide 20: Conclusion
Conclusion Significant upside from Manufacturing Excellence Strategically located manufacturing assets in the best mining markets Implementation of Manufacturing Excellence strategy well advanced New leadership structure driving consistent approach, global best practice, clear accountability and bet
Slide 21: Questions & Answers
Questions & Answers Jeanne Johns, Tim Wall & Frank Micallef
Slide 22: Explosives & Technology Overview
Explosives & Technology Overview Jeanne Johns Managing Director & Chief Executive Officer
Slide 23: Health, Safety & Environment (HS&E)
Health, Safety & Environment (HS&E) Zero Harm for Everyone, Everywhere remains our #1 priority Relentless focus on improving safety performance ▪ Refreshed safety strategy delivering results ▪ Total Recordable Injury Frequency Rate (TRIFR) continues to improve ▪ Process Safety and Potential High Sev
Slide 24: Manufacturing Excellence
Manufacturing Excellence Strong progress on Manufacturing Excellence strategy Manufacturing leadership refresh completed in 2019 Strategy governed by global principles and underpinned by detailed plans for each manufacturing site Rolled out reliability improvement plans across all manufacturing site
Slide 25: Our Purpose
Our Purpose Unlocking the world’s natural resources through Innovation on the ground Partnering with our global industry leading customers Unlocking the world’s resources that are critical for: ▪ Infrastructure development in the communities in which we operate ▪ Providing energy to millions of peop
Slide 26: Evolving mining industry needs, creating opportunities for IPL
Evolving mining industry needs, creating opportunities for IPL Industry remains attractive, but more challenging for operations ▪ Despite strong fundamentals, the mining industry is facing: ⎻ Higher cost of extraction with ore bodies becoming increasingly difficult to access ⎻ Declining ore grades a
Slide 27: Customer challenges inspire our innovation
Customer challenges inspire our innovation What matters to our customers How we partner and deliver ▪ Strategic and innovative partnerships that deliver ▪ Established technology alliance with largest global value and flexibility mining company in 2019 ▪ Maintain & improving cost position ⎻ Partnersh
Slide 28: Differentiated Energy (Delta E) Technology
Differentiated Energy (Delta E) Technology A practical and innovative solution for our customers for their operating challenges One of our range of premium technology offerings Unique and patented explosives and delivery system Substantial technology penetration underpinned by superior blasting outc
Slide 29: Growth Underpinned by Premium Technology
Growth Underpinned by Premium Technology High growth in technology uptake, ground breaking new products coming online Successfully leverage proven technologies Launched new wide application technologies ▪ Launched Delta E across Asia Pacific in 2H18, now representing ~10% of APAC truck fleet ▪ Launc
Slide 30: High Quality Explosives Business
High Quality Explosives Business Positioned in the two most attractive explosives markets in the world Strategically located assets in close proximity to highest North America quality customers $7 billion* explosives Full range of products and services to support revenue market diverse sectors Stron
Slide 31: Positioned for growth - Americas
Positioned for growth - Americas Growth momentum in the Americas underpinned by premium technology Well established premium technology platform 2.7 million* tonne Strategically located nitrogen manufacturing footprint ammonium nitrate market size Strong Quarry & Construction footprint & growth High
Slide 32: Positioned for growth – Asia Pacific
Positioned for growth – Asia Pacific Technology played pivotal role in recontracted Australian volumes Continue to leverage strategically located Moranbah 2.3 million* tonne operations ammonium nitrate market size ▪ De-bottlenecking – a high return, low capital opportunity * Estimate Strong growth e
Slide 33: Leading Technology Solutions
Leading Technology Solutions Robert Rounsley Chief Technology Development Officer
Slide 34: Unique Approach to Technology, Research and Development
Unique Approach to Technology, Research and Development Customer aligned investment Clear strategic drivers for development ▪ Improved mining safety ▪ Reduced environmental impacts ▪ Increased mining efficiency and productivity Customer imperatives ▪ Society demands improved safety performance from
Slide 35: Our Practical Approach and our Technologies are Different
Our Practical Approach and our Technologies are Different Premium Initiation Systems Conventional Products and Systems The Dyno Nobel Advantage ▪ Basic EDS with inherent safety challenges ▪ Unparalleled safety inherent in design of EDS ▪ Excessive harness failure rates with lower quality ▪ Two way c
Slide 36: Even our Approach to Bulk Product is Different
Even our Approach to Bulk Product is Different Bulk products and delivery systems Conventional Products and Systems The Dyno Nobel Advantage ▪ Several product streams, limited flexibility ▪ Single product logistics with better flexibility ▪ Complicated and expensive blending equipment ▪ Fast loading
Slide 37: Technology Delivering Improved Customer Outcomes
Technology Delivering Improved Customer Outcomes Improved safety and better for the environment Our Delta E technology achieving significantly reduced carbon emissions, up to 38% reduction Reactive ground product suite improved, now further reducing risks in hot and reactive ground conditions Delta
Slide 38: Market Leading Premium Technology Winning on the Ground Today
Market Leading Premium Technology Winning on the Ground Today Practical and flexible tools Practical solutions customers can adopt quickly Flexible tools that apply across a range of sectors ▪ Plug-in capability a key design principle ▪ Flexibility a key design principle ▪ Practical adoption critica
Slide 39: Winning Technologies Today
Winning Technologies Today Differential Energy DigiShot Plus 4G ▪ Unique patented system ▪ Unparalleled safety ▪ Automated and ultra fast loading rates ▪ Full product suite that is ▪ Tailored energy profiles suitable for all mining, quarry and seismic ▪ Applicable in all major mining and quarry segm
Slide 40: Our Unique Technology Enables Multiple Solutions
Our Unique Technology Enables Multiple Solutions Technology that creates flexible tools used to solve problems across different segments Iron Ore Coal Quarry & Construction Copper - hard rock mass mining Lumps and fines Improved equipment Fines and Comminution energy costs optimisation productivity
Slide 41: Iron Ore Value - Lump/Fines Optimisation
Iron Ore Value - Lump/Fines Optimisation Predictable ratios and a better mix driving customer value 40
Slide 42: Coal Segment Value
Coal Segment Value Improved equipment utilisation The Challenge Dyno Nobel Solution ▪ ‘Hard dig’ and ‘tight dig’ are common challenges in overburden excavation ▪ Dyno Nobel’s premium technology offers the solution ▪ Causes reduced productivity for mining equipment ▪ Advanced bulk products apply the
Slide 43: Quarry Blasting Value
Quarry Blasting Value Fines reduction The Challenge Dyno Nobel Solution ▪ Fine particle generation from blasting, driving ▪ Delta E emulsions and unique delivery system direct loss of economic material ▪ High energy explosives generate increased fines ▪ Delta E reduces fines by approximately 10% ▪ A
Slide 44: Copper Segment Value
Copper Segment Value Reduced crushing cost and energy use The Challenge Dyno Nobel Solution ▪ Ore grades are declining across many ▪ Grade engineering allows distinction between mines globally higher and lower grades zones in large blasts ▪ More material must be moved to extract the same mineral res
Slide 45: Growth Underpinned by Premium Leading Technology
Growth Underpinned by Premium Leading Technology Continued growth in Americas, successfully leveraged premium technology into Asia Pacific Premium Emulsion Electronic Detonator Systems (thousand metric tonnes sold) (million units sold) 300 80 4 2.0 16% 32% 25% 60 3 1.5 200 61% 40 2 1.0 100 20 1 0.5
Slide 46: Our Premium Technology Systems are Continually Evolving
Our Premium Technology Systems are Continually Evolving Delta E DigiShot Plus 4G ▪ Now in three standard Mobile Processing Unit (MPU) ▪ Continuous software upgrades with ViewShot 3D configurations – different capacities and delivery rates ▪ Differential GPS provided to control equipment for sub-metr
Slide 47: Technology Investment for today and the future
Technology Investment for today and the future Focus for Today Focus for Tomorrow ▪ Ensuring maximum penetration and uptake ▪ Strategically directed, targeted and efficient capital allocation ▪ Investing to support the rollout of our premium technology ▪ Investing to ensure ongoing future success ▪
Slide 48: Winning with New Technology for the Future
Winning with New Technology for the Future 47
Slide 49: Nobel Fire, our Central Digital Control System
Nobel Fire, our Central Digital Control System 48
Slide 50: Conclusion
Conclusion Significant upside from market leading technology The mining sector is adopting technology at an accelerating rate Dyno Nobel is well placed to meet increasing industry demand, with high return, low capital capacity expansion underway Significant value add opportunities with EDS market sh
Slide 51: Dyno Nobel Americas
Dyno Nobel Americas Nick Stratford President Americas
Slide 52: Dyno Nobel Americas - Introduction
Dyno Nobel Americas - Introduction 2019 priorities being delivered We continue to improve the consistency of our safety practices and culture across the business The Explosives business continues to perform well, despite challenging market conditions in FY19 The Explosives business continues to grow
Slide 53: Dyno Nobel – North America Explosives market overview
Dyno Nobel – North America Explosives market overview North American AN Market Dyno Nobel 22% 26% 32% 2.7mt* market share 27% 39% 39% 47% Coal Metals Q&C ▪ Balanced industry portfolio across our markets ▪ Greater share in the United States market ▪ Expansive Quarry & Construction footprint ▪ Greater
Slide 54: Dyno Nobel Americas – Customer Value Proposition
Dyno Nobel Americas – Customer Value Proposition Only supplier with full in-region manufactured product position, supplemented with third party AN supply Strong local distribution position – service orientated distributor network with presence in every major mining and quarry region in the continent
Slide 55: Dyno Nobel Americas – Explosives growth profile
Dyno Nobel Americas – Explosives growth profile FY 2016 – FY 2019 EBIT growth 13% EBIT CAGR, driven by: DNA USD EBIT ▪ Approximately 8% AN volume CAGR, driven by market share gains across all sectors EBIT EBIT Margin U$’ mill % of Revenue ▪ Increase in EBIT margins driven by growth in premium 160 20
Slide 56: Dyno Nobel Americas – Product driven growth
Dyno Nobel Americas – Product driven growth EDS CAGR of 32%, driven by: EDS growth ▪ Overall market share growth EIS Sales Million units ▪ Conversion of customers from Non-electronic to Electronic 4 32% Detonator Systems, enabled by launch of 4G (increased 3 functionality) driving better blast outco
Slide 57: Coal market position
Coal market position Market size of approximately 1 million tonnes of AN AN volume growth for Dyno Nobel from 2016 to 2019 was approximately 10% CAGR Dyno Nobel’s strategic position: ▪ Cheyenne, Wyoming and Louisiana, Missouri plants well placed to service the Powder River Basin and Illinois Basin c
Slide 58: Quarry & Construction market position
Quarry & Construction market position Market size: 600kT of AN Q&C volumes growth for Dyno Nobel of ~7% per annum over the past 3 years, approximately double market growth rates Dyno Nobel’s strategic position: ▪ Established business with largest stone producers as customers ▪ Supported by business
Slide 59: Base & Precious Metals markets
Base & Precious Metals markets Market size: 1,000kT of AN AN volume growth for Dyno Nobel from 2016 to 2019 was approximately 5% CAGR Metals outlook – robust Copper and Gold outlooks, Iron Ore expected to be stable in the US Dyno Nobel’s strategic position: ▪ Positioned to service customers in logic
Slide 60: Dyno Nobel – Chile market overview
Dyno Nobel – Chile market overview Market overview Chile is one of the strongest copper markets globally: ▪ Largest copper producing country in the world ▪ Market growth outlook of 1-3% Opportunity for premium technology solutions as copper miners are experiencing more challenges: ▪ Declining ore gr
Slide 61: Chile market expansion
Chile market expansion Dyno Nobel Chile Dyno Nobel has an existing presence in Chile – an assembly plant for Electronic and Non-electronic detonators for sale into the Chilean and Peru markets Emulsion manufacturing is a logical extension of the business footprint, customers asking for an alternativ
Slide 62: Conclusion
Conclusion Our priorities and areas of focus Safety – first priority within the business, focus remains on the consistent application of our safety practices across all of our sites Growth – maintain business momentum by investing in our people, servicing our customers via our premium product techno
Slide 63: Dyno Nobel Asia Pacific
Dyno Nobel Asia Pacific Greg Hayne President Asia Pacific
Slide 64: Dyno Nobel Asia Pacific – 2019 Priorities
Dyno Nobel Asia Pacific 2019 – Priorities being delivered Continuing to foster strong safety culture on our journey to Zero Harm Premium technology played a pivotal role in successfully contracted long term Australian volumes Structured customer relationships developed ▪ Voice of customer program ▪
Slide 65: Australian explosives market overview
Australian explosives market overview Explosives market is changing Australian AN Explosives Market 12% 26% Coal 2.3mt* Iron Ore Hard rock & Underground 62% DNAP AN facility 3rd party AN facility * Estimate DNAP emulsion plant 3rd party emulsion plant Mining industry looking for technology solutions
Slide 66: Eastern Australia
Eastern Australia Strategically located assets with premium technology offering AN Market ▪ Large, attractive and growing market Dyno Nobel Mt Isa (ANFO, Distribution) High quality strategically located assets ▪ Close proximity to major customers Dyno Nobel Moranbah Mt Isa Base Metals (Emulsion, AN)
Slide 67: Western Australia
Western Australia Leverage our premium technology to deliver solutions for our customers Technology continuing to deliver benefits for customers in Western Australia Dyno Nobel Port Hedland Focus on providing technology solutions and value add to (Emulsion) customers: ▪ Premium technologies – Delta
Slide 68: Profitable Growth - Technology
Profitable Growth - Technology Growth opportunities, underpinned by our premium technology EDS growth Strong growth in technology volumes in Western Australia EIS Sales and Bowen Basin Million units 2.0 ▪ EDS CAGR of 61% between 2016 and 2019 1.5 61% 1.0 Building technology capacity to meet growing
Slide 69: Profitable Growth – Expansion
Profitable Growth – Expansion Plant capacity expansion opportunities progressing Moranbah plant operations Helidon Initiation Systems Plant ▪ Leveraging our location advantage in the attractive ▪ Additional capacity added since FY17 metallurgical coal market segment ▪ Further capacity addition plann
Slide 70: Conclusion
Conclusion Well positioned to grow from re-based business Strategically located assets and premium technology offering positions us well in attractive market Stronger customer relationships, including a new Technology Alliance with the worlds largest mining company Significant upside from technology
Slide 71: Questions & Answers
Questions & Answers Jeanne Johns, Nick Stratford, Greg Hayne, Robert Rounsley
Slide 72: Balance Sheet
Balance Sheet Frank Micallef Chief Financial Officer
Slide 73: Balance Sheet
Balance Sheet Successful refinancing activity completed in FY19 Debt Maturity3 Bank debt ▪ Extended average tenor to 5.8 years A$’mill Capital Markets ▪ Increased diversity of funding sources 800 ▪ Lower credit margins 600 400 Investment grade credit ratings 200 ▪ Standard & Poor’s: BBB (stable outl
Slide 74: Capital Discipline
Capital Discipline Remain disciplined as free cash flows improve from FY20 Continued focus on expenditure ▪ Maintain rigorous capital and cost discipline ▪ Value spending on technology, delivering strong returns Sustenance expenditure ▪ Sustenance capital expenditure for FY19 expected at approximate
Slide 75: Forward View & Strategic Highlights
Forward View & Strategic Highlights Jeanne Johns Managing Director & Chief Executive Officer
Slide 76: IPL Balanced Scorecard to Track Progress to FY 2021
IPL Balanced Scorecard to Track Progress to FY 2021 Value Drivers Target Progress Update Zero Harm & People ▪ TRIFR of 0.70 ▪ TRIFR at 1H19 of 0.78, substantial improvement vs pcp ▪ 25% gender diversity ▪ Continuous improvement across HS&E targets ▪ 2nd quartile employee engagement score ▪ Improveme
Slide 77: Forward View & Strategic Highlights
Forward View & Strategic Highlights Zero Harm, focus on continuous and sustained improvement Manufacturing Excellence anticipated to deliver $40m-$50m* annual EBIT uplift by FY22 Progressing strategic review of the Australian Fertilisers business Focus on Customers and Technology solutions to win an
Slide 78: Questions & Answers
Questions & Answers Jeanne Johns & Frank Micallef
Slide 79: Incitec Pivot Appendix
Incitec Pivot Appendix 1
Slide 80: FY19 Group Guidance
FY19 Group Guidance 2019 Estimates Assumptions Commodities / FX FY19 FY19 FY19 EBIT Estimate Estimate impact (Current) (Previous) $’million DAP FOB Tampa – US$/tonne 364 402 ($38m) Urea FOB MEGU – US$/tonne 271 266 $2m Ammonia CFR Tampa – US$/tonne 271 298 ($26m) Urea FOB NOLA – US$/short tonne 261
Slide 81: Incitec Pivot Appendix
Incitec Pivot Appendix 2
Slide 82: Investor Day: Moranbah Operations Site Visit
Investor Day Moranbah Operations Site Visit 5 September 2019
Slide 83: Zero Harm
Zero Harm Safety is our #1 priority Total Recordable Incident Frequency 4.5 3.0 1.5 FY14 FY15 FY16 FY17 FY18 FY19 (to date) Strong, proud safety record ▪ Record safety performance – August 2019 rolling TRIFR of Nil ▪ Passionate Leadership & Engaged Workforce 82
Slide 84: Strategic Asset Location in Best Market
Strategic Asset Location in Best Market Proximity to our customers, a strategic advantage Dyno Nobel Mt Isa Operations strategically located (ANFO, Distribution) ▪ Moranbah in north & QNP in south Bowen Basin, covering Mt Isa Base Metals the best metallurgical coal market in the world Dyno Nobel Mor
Slide 85: Moranbah Plant Operations
Moranbah Plant Operations Plant overview Plant commissioned in 2012 Production capacity of 380k mt ANSOL per annum Low cost / highly efficient AN producer Major feedstock ▪ Natural gas supply from adjacent fields (not connected to East Coast grid) ▪ Self sufficient on electricity generation Gas supp
Slide 86: Reliable Plant Operations
Reliable Plant Operations Strong reliability performance and improved efficiencies Moranbah – Ammonia Reliability Moranbah - Gas Consumption GJ/mt 120 60 92 94 93 87 80 -3% 45 % Reliability 40 30 15 2016 2017 2018 1H19 FY14 FY15 FY16 FY17 FY18 Reliability performance 85
Slide 87: Moranbah Plant Expansion
Moranbah Plant Expansion High returns, low capital investments Tightening East Coast AN supply/demand balance ▪ Queensland ammonium nitrate supply/demand balance expected from around 2022 supports additional domestic manufacturing capacity ▪ Moranbah remains low cost producer in the best location, w