Orica Limited · ASX:ORI
Orica — FY2005 Earnings Presentation
40 slides from Orica's earnings presentation, November 2005
Slide 1: Full Year Results Asian Roadshow
. Full Year Results Asian Roadshow November 2005 Graeme Liebelt Managing Director & CEO Noel Meehan Executive Director Finance Frank Micallef Investor Relations Manager
Slide 2: Financial Summary
Year Ended 30 September FINANCIAL SUMMARY 2005 2004 % Change Underlying Results: Sales Revenue A$M 5,127 4,610 11 NPAT (excluding significant items) A$M 335 326 3 EBIT (excluding significant items) A$M 577 553 4 Results including significant items: Significant items after tax A$M (99) 2 NPAT includi
Slide 3: Significant Items (A$M)
Year Ended 30 September SIGNIFICANT ITEMS (A$M) 2005 2004 Qenos Divestment related costs (34) - Legacy Issues Botany groundwater provision (19) (46) Surplus property sales - 39 (19) (7) Restructuring and Rationalisation Mining Services - -restructuring - (16) -asset impairment - (12) Fertilisers (31
Slide 4: Financial Summary
Year Ended 30 September FINANCIAL SUMMARY 2005 2004 % Change Results (before significant items) Earnings per share cents 122.7 119.0 3 Return on shareholders' funds % 23.2 23.1 Results (after significant items) Earnings per share cents 86.6 119.8 (28) Return on shareholders' funds % 16.4 23.3 (30) R
Slide 5: Orica's Approach – Value Drivers
Orica’s Approach – Value Drivers 5
Slide 6: Orica's Strategy
Orica’s Strategy • Principles - Market leadership - Earning the “Right to Grow” - Growing “Close to the Core” • Progress to date • Future direction ABOVE AVERAGE RETURN TO SHAREHOLDERS 6
Slide 7: Cost Productivity
Year Ended 30 September COST PRODUCTIVITY 2005 2004 Increase $M $M $M % Sales revenue 5,127 4,611 516 11.2 Variable costs 3,151 2,717 434 16.0 Gross margin 1,976 1,894 82 4.3 Gross margin/sales 38.5% 41.1% Cash fixed costs 1,293 1,230 63 5.1 Depn and amortisation 176 171 5 2.9 Total Costs 4,620 4,11
Slide 8: Capital Productivity
Year Ended 30 September CAPITAL PRODUCTIVITY 2005 2004 2003 Disciplined Capital Management TWC / Sales % 11.9% 16.6% 16.9% Inventory Turns (times) 3.8x 3.6x 3.9x Sustenance as % of Depreciation 104.6% 106.2% 55.0% Major Plant Capacity Yarwun AN 295 ktpa 275 ktpa 240 ktpa Yarwun Sodium Cyanide 60 ktp
Slide 9: Orica – Our Culture
ORICA – Our Culture • SH&E • Commercial Ownership – Group Procurement – Supply Chain Improvement – Manufacturing Efficiency • Creative Customer Solutions – Customer Driven – Technology • Working Together DELIVER THE PROMISE 9
Slide 10: Financial Results - NPAT
Year Ended 30 September FINANCIAL RESULTS - NPAT 2005: Sales $5.1B, NPAT* $335M 400 25% 350 20% 300 335 326 NPAT (A$M) 250 15% ROSHF 270 200 239 150 10% 100 5% 50 62 0 0% 01 02 03 04 05 CONTINUOUS IMPROVEMENT * pre significant items/abnormals 10
Slide 11: EBIT Performance of Existing Businesses
EBIT* Performance of Existing Businesses Past Performance Orica Today A$M 700 600 500 400 300 200 100 0 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 LESS CYCLICAL, HIGHER BASE & IMPROVING EARNINGS 11 * excluding corporate costs
Slide 12: NPAT Analysis
Year Ended 30 September NPAT ANALYSIS A$M 400 390 7 380 6 7 370 8 360 14 (22) 350 18 340 (22) 335 (5) (2) 330 326 320 310 300 NPAT Existing Nth Acqn’s Sale & Parafield Other Growth Interest Goodwill Yates NPAT FY04 Businesses America Leaseback spend FY05 9 EBIT growth 4% 9 No recurrence of environme
Slide 13: Mining Services
Mining Services Sales $1,987M; EBIT $334M; Average Net Assets $1,128M; RONA 30% 400 18 A$M 350 16 300 14 450 EBIT MARGIN % 12 14 7 250 51 EBIT A$M 10 400 200 8 72 150 350 334 6 (68) (8) (4) 100 4 300 270 50 2 250 0 0 2002 2003 2004 2005 200 EBIT Price/ Net N.A. Sale & Variable FX Other EBIT FY04 Mix
Slide 14: Fertilisers
Fertilisers Sales $1,074M; EBIT $72M; Average Net Assets $638M; RONA 11% 120 10 A$M 9 100 8 140 7 EBIT MARGIN % 80 7 8 6 EBIT A$M 60 120 12 5 40 4 104 100 (27) 20 3 2 0 (14) 1 80 72 2002 2003 2004 2005 (10) -20 0 (8) 60 EBIT Parafield Rebates QGC Volume Net Phosphate Other/ EBIT first half ebit seco
Slide 15: Consumer Products
Consumer Products Sales $769M; EBIT $97M; Average Net Assets $215M; RONA 45% 120 14 A$M 100 110 7 EBIT MARGIN % 13 80 EBIT A$M 100 60 12 100 97 3 (7) 40 (3) 11 (3) 20 90 0 10 2002 2003 2004 2005 80 EBIT Efficiency Volume Yates Net Other EBIT first half ebit second half ebit EBIT MARGIN FY04 Price/Mi
Slide 16: Chemnet
Chemnet Sales $1,029M; EBIT $69M; Average Net Assets $389M; RONA 18% 80 10 A$M 70 9 80 8 EBIT MARGIN % 60 7 4 50 6 75 8 EBIT A$M 40 5 30 4 70 (4) 69 3 20 (2) 2 10 1 65 63 0 0 2002 2003 2004 2005 60 EBIT Acqn's Volume Other Net price EBIT FY04 FY05 first half ebit second half ebit EBIT MARGIN 9 Recor
Slide 17: Chemical Services
Chemical Services Sales $412M; EBIT $61M; Average Net Assets $381M; RONA 18%* 70 17 A$M 60 70 16 EBIT MARGIN % 50 2 1 65 2 61 EBIT A$M 40 15 60 3 (3) 30 5 14 55 20 51 13 50 10 0 12 45 2002 2003 2004 2005 40 EBIT Net Price Sale & Acqn's Miex Restructure Other EBIT FY04 L’back FY05 first half ebit sec
Slide 18: Corporate Centre and Other Support Services (A$M)
Corporate Centre and Other Support Services (A$M) 2005 2004 $ Change Corporate Centre (28.4) (26.8) (1.6) Other Support Costs (27.0) (7.3) (19.7) (55.4) (34.1) (21.3) Corporate Centre Growth & Productivity Costs $M Supply Chain 9 8 Increased salary costs Customer Focus 5 Global Procurement/Sourcing
Slide 19: Cashflow A$M
Year Ended 30 September CASHFLOW A$M 2005 2004 Change EBITDA 753 724 29 Net interest paid (82) (58) (24) Net tax paid (209) (45) (164) Trade working capital 167 (15) 182 Non-trade working capital (253) (18) (235) Net operating cash flows 376 588 (212) Net investing cash flows (301) (381) 80 Net fina
Slide 20: Balance Sheet (A$M)
BALANCE SHEET (A$M) Sept March Sept 2005 2005 2004 Trade working capital 613 949 767 Net property, plant & equipment 1,651 1,567 1,518 Net other assets 501 557 330 Net debt (1,112) (1,441) (977) Net Assets 1,653 1,632 1,638 Orica shareholders' equity 1,460 1,434 1,429 Outside equity interests 193 19
Slide 21: Net Debt, Gearing and Interest Cover
Net Debt, Gearing and Interest Cover 1600 50% Target gearing range 1400 45% shaded 40% 1200 Net debt A$M 35% 1000 30% Gearing 800 25% 600 20% 15% 400 10% 200 5% 0 0% HY02 FY02 HY03 FY03 HY04 FY04 HY05 FY05 z Gearing 40.2% 21 z Interest cover 5.6 times. Target > 5x
Slide 22: Conclusion
Conclusion • Profit improvement • Net Debt and Working Capital improvement on 2005 half year • Progress dealing with legacy issues – Qenos – Botany Groundwater Remediation 22
Slide 23: A-IFRS Impact
A-IFRS Impact • A-IFRS adoption from 1 October 2005 • Key changes and impact identified and reported - Reduction in shareholder’s equity 30 September 2005 of $121.5M - Key impact on net profit; no goodwill amortisation offset by recognition of employee share based payments. • A-IFRS is likely to res
Slide 24: Rights Issue: ~ $512M renounceable
Rights Issue: ~ $512M renounceable • 1 right offered for every 8 shares held at 7.00 pm (AEDT) on Tuesday 29 November 2005 • Issue Price of $15 per share – 25% discount to Theoretical Ex-Rights Price – 27% discount to adjusted closing price on Friday 18 November 2005 (excludes the value of the final
Slide 25: Summary
Summary • Net profit after tax up 3% – Strong revenue growth – Significant investment in growth and productivity initiatives – Increased dividends for shareholders • Ability to recover input costs • Results demonstrates resilience of earnings 25
Slide 26: Outlook - 2006
Outlook - 2006 Earnings should continue to grow, subject to seasonal conditions in the agricultural sector and the global economic environment. 26
Slide 27: Supplementary Information
Supplementary Information 27
Slide 28: Orica – What We Do
Orica – What We Do Mining Services Market Leadership • Commercial explosives plus blast management Leading Brands Chemicals Businesses • Niche chemical distribution, value add and Privileged united by Assets niche manufacturing chemical sciences Capable Consumer Products People • Paint, paint prepar
Slide 29: Orica - Business Dimensions
Twelve Months Ended 30 September, 2005 ORICA - BUSINESS DIMENSIONS Sales Revenue EBIT Operating Net Assets Employees 0% 20% 40% 60% 80% 100% Mining Fertilisers OCP Chemnet Chemical Services 29
Slide 30: Orica - Sales by Region
Twelve Months Ended 30 September, 2005 ORICA - SALES BY REGION 4% 7% 5% 13% 61% 10% Australia NZ North America Latin America Asia Europe 30
Slide 31: A$ Closing Price
A$ Closing Price 0 5 10 15 20 25 Sep 01 Mar 02 Sep 02 Mar 03 Sep 03 Mar 04 Sep 04 Mar 05 Orica - creating value for shareholders Sep 05 31
Slide 32: Transaction structure
Transaction structure Creative structure used to secure key growth assets 1. Macquarie consortium acquires 100% of Dyno Nobel in the first instance 1. 2. Macquarie consortium on-sells MACQUARIE European, Middle Eastern, African, CONSORTIUM Asian and Latin American ♦ North America businesses to Orica
Slide 33: Strategic & Financial Rationale
Strategic & Financial Rationale A clear and unique strategic fit for Orica Mining Services and a financially compelling case • Increased exposure to the resources & infrastructure sectors • Expansion of global footprint • OMS transforming acquisition with manageable risk • Earnings diversification f
Slide 34: Significant Cost Savings
Significant Cost Savings To be achieved from… EBIT cost savings by type EBIT cost savings by geography 11% 18% 24% 7% 36% 15% 46% 43% (36%) Rationalisation of administration (24%) Latin America (46%) Rationalisation / optimisation of plants (15%) Asia (43%) EMEA (7%) Improved logistics / purchasing
Slide 35: Rights Issue - Indicative Timetable
Rights Issue - INDICATIVE TIMETABLE 1. Lodgement of prospectus with ASIC 1. Monday 21 November 2005 2. Rights trading commences 2. Wednesday 23 November 2005 3. Final Dividend and Rights Ex Date 3. Wednesday 23 November 2005 4. Record date for rights entitlements 4. Tuesday 29 November 2005 5. Prosp
Slide 36: A-IFRS: Impact on Net Profit
A-IFRS: Impact on Net Profit 2005 A$M Normal Significant Items AGAAP Net profit after tax 334.9 (98.6) Discontinuation of amortisation of goodwill 36.2 Recognition of employee based share based payments (11.6) Minority interests adjustment (0.8) Taxation (16.0) Adjustment for impairment losses - (25
Slide 37: A-IFRS: Impact on Shareholders' Equity
A-IFRS: Impact on Shareholders’ Equity 2005 (A$M) AGAAP Shareholder’s Equity 1653.1 Defined Benefit Plan (net of tax) (50.9) Recognition of employee share based payments (45.1) Write Back of goodwill amortisation 36.2 Impairment of assets including goodwill (net of (53.3) tax) Derecognition of Acqui
Slide 38: Foreign Currency - Snapshot
FOREIGN CURRENCY- Snapshot A$ Call Options: Hedging of USD Exposure (as at 30 September 2005) Offshore Business Manufactured Hedge Sales Nitrogen Product Premium Year Cover Strike Cover Strike expense A$M Rate A$M Rate A$M 2006 54 67 cents 73 68 cents 5 2007 35 68 cents 44 68 cents 3 2008 16 63 cent
Slide 39: Foreign Currency - Sensitivity
FOREIGN CURRENCY- Sensitivity Every one cent movement in the exchange rate will impact EBIT: 2006 +/- $1M to $1.5M 2007 +/- $1.5M to $2.0M 2008 +/- $2.0M to $2.5M ACTIVE RISK MANAGEMENT 39
Slide 40: Important Notice
Important Notice This presentation has been prepared by Orica Limited. The information contained in this presentation is for informational purposes only and does not constitute an offer to issue or arrange to issue, securities or other financial products. The information contained in this presentati