Orica Limited · ASX:ORI
Orica — Investor Presentation (July 2010)
81 slides from Orica's investor presentation, Jul 15, 2010
Slide 1: Investor Briefing 15 July 2010
For personal use only Investor Briefing 15 JJuly l 2010
Slide 2: Presented by
Presented by: For personal use only John Beevers Chief Executive Officer Officer, Orica Mining Services Tony Edmondstone Chief Financial Officer Officer, Orica Mining Services Jez Smith General Manager Marketing & Technology Technology, Orica Mining Services Cluny Randell General Manager g Manufactu
Slide 3: Key Messages Today
Key Messages Today For personal use only • Global Leader • Emerging from the GFC in good shape • Step change in business operating efficiency • Strategically well positioned • Geographic footprint • Technology • Customer value focus • Excellent Growth Potential • Manufacturing expansions underway •
Slide 4: Agenda
1. Introduction / Overview For personal use only 2. Managing Through the GFC 3. Financial Performance Break: Afternoon Tea 4. Industry Trends 5 G 5. Growth th Levers L 6 Summary and Questions 6. Orica Mining Services – 2010 Investor Briefing
Slide 5: Introduction to Orica Mining Services
Introduction to Orica Mining Services For personal use only • The world’s leading supplier of commercial explosives and blasting systems • Operate globally across ~100 countries • Extensive R&D, pioneers of technology • Deliver advanced blasting solutions tailored to specific customer needs and chal
Slide 6: Orica Mining Services Vision
Orica Mining Services Vision To be the Global leader in commercial blasting systems by being the best at For personal use only improving our customers’ productivity through the application of superior know how. Key Imperatives Differentiation Customer Differentiation through investment in Maximising
Slide 7: Culture to Deliver the Promise
Culture to “Deliver the Promise” For personal use only SH&E – “Ensuring Our Future” No injuries to anyone ever ever. Value people and the environment environment. Commercial Ownership Run the business as if it’s your own. Creative Customer Solutions Think differently, y, deliver swiftly, y, and capt
Slide 8: No Injuries to Anyone, Ever
No Injuries to Anyone, Ever For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 9: Differentiating Based on Innovation
Differentiating Based on Innovation For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 10: Privileged Manufacturing Assets
Privileged Manufacturing Assets For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 11: Strength in Ammonium Nitrate Position
Strength in Ammonium Nitrate Position For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 12: World Class Bulk Explosives Distribution Points
World Class Bulk Explosives Distribution Points For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 13: Wide Range of Packaged Explosives
Wide Range of Packaged Explosives For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 14: Specialised Range of Bulk Explosives
Specialised Range of Bulk Explosives For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 15: Sophisticated Bulk Delivery Systems
Sophisticated Bulk Delivery Systems For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 16: Quality and Reliable Initiating Systems
Quality and Reliable Initiating Systems For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 17: World Leading Electronic Blasting Systems
World Leading Electronic Blasting Systems For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 18: Integrated Supply Chain
Integrated Supply Chain For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 19: World's Best Technical Capability
World’s Best Technical Capability For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 20: For personal use only
For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 21: Broad Market Exposure
Broad Market Exposure For personal use only Open Cut 63% (Metal and Coal) Underground 15% Quarry, Construction Quarry 22% * 2010F OMS Revenue Orica Mining Services – 2010 Investor Briefing
Slide 22: Diverse End Markets
Diverse End Markets For personal use only Other Oth Thermall C Th Coall 15% 24% Q&C Gold 22% 15% Copper Met Coal 16% 8% * 2010F OMS Revenue Orica Mining Services – 2010 Investor Briefing
Slide 23: Global Presence
Global Presence – Number 1 or Number 2 in Each of Our Traditional Markets For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 24: Horizons of Growth
3 Horizons of Growth Horizon 3 – A Transformed Business • Truly Global For personal use only • Benchmark efficiency in Manufacturing and Supply Chain • Benefit B fit from f expansion i plans l • Accelerated returns from innovation Horizon 2 - Embedding Outcomes • Embedding the efficiencies from Hori
Slide 25: Agenda
1. Introduction / Overview For personal use only 2. Managing Through the GFC 3. Financial Performance Break: Afternoon Tea 4. Industry Trends 5 G 5. Growth th Levers L 6 Summary and Questions 6. Orica Mining Services – 2010 Investor Briefing
Slide 26: Key Message Last Year: Resetting the Cost Base
Key Message Last Year: Resetting the Cost Base For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 27: Managing Through the GFC
Managing Through the GFC For personal use only • Cost management and business efficiencies • Disciplined cash management • Enhanced customer relationships • Preparing for the upturn • Continued focus on long term opportunities Orica Mining Services – 2010 Investor Briefing
Slide 28: Cost Discipline: Recent OMS Results
Cost Discipline For personal use only Recent OMS Results OMS 2009 full year results OMS 2010 half one results $M $M 550 172 1100 (125) 33 (126) 1000 49 500 71 (100) 900 230 450 (56) 800 (34) 737 400 700 28 (15) 636 (9) 350 (5) 331 600 319 300 500 400 250 FY08 EBIT Price/Mix Productivity FX Ammonia V
Slide 29: Cost Discipline: Regional Reorganisation (EMEA)
Cost Discipline: For personal use only Regional Reorganisation (EMEA) • In late 2008 the EMEA region experienced rapid deterioration in demand, particularly in the Q&C market • Competitive pressure was increasing as the crisis deepened • Agglobal,, cross functional project p j team was appointed pp
Slide 30: Cost Discipline: Brownsburg Productivity (Canada)
Cost Discipline: For personal use only Brownsburg Productivity (Canada) • Largest manufacturer of Electronic Blasting Systems globally. Range includes i-kon ™, Uni tronic ™ and e-Dev ™. • The combination of supplyy chain improvements, manufacturing automation and lean manufacturing • 100+% increase
Slide 31: Cost Discipline: Limay Productivity (Philippines)
Cost Discipline: For personal use only Limay Productivity (Philippines) • Three key Lean Six Sigma projects and a number of Profit Improvement Projects • The first delivered significant gain in capacity and productivity in Packaged Explosives • The second enabled the plant to meet increased Indonesi
Slide 32: Disciplined Cash Management: Improved TWC Performance
Disciplined p Cash Management: g For personal use only Improved TWC Performance • Significant g improvement p in Trade Working g Capital, p due primarily to: • 16% reduction in Days Sales Outstanding (DSO) • 17% reduction in Inventory days R lli TWC / Rolling Rolling R lli Sales S l 14.0 13 5 13.5 T
Slide 33: Preparing for the Upturn
Preparing for the Upturn: For personal use only • Organisational design • Supply chain efficiency • M Manufacturing f t i efficiency ffi i • Resource modelling • Embedding core systems and processes Efficiency improvements will deliver operating leverage as volumes increase Orica Mining Services – 2
Slide 34: Preparing for the Upturn: Embedding Core Systems & Processes
Preparing for the Upturn: For personal use only Embedding Core Systems & Processes • Key projects have been implemented and others are still underway to further leverage the core strengths within our business • These functional projects include: • Training • Global single instance IT Systems • Procu
Slide 35: Continued Focus on Long Term Opportunities
Continued Focus on For personal use only Long Term Opportunities • Major supply contract renewals: • AN purchase contracts in Latin America, North America and EMEA • Long o g term e co contracts ac s for o AN feedstock eeds oc (Gas a andd Ammonia) o a) in Australia, us a a, Asia and North America •
Slide 36: Agenda
1. Introduction / Overview For personal use only 2. Managing Through the GFC 3. Financial Performance Break: Afternoon Tea 4. Industry Trends 5 G 5. Growth th Levers L 6 Summary and Questions 6. Orica Mining Services – 2010 Investor Briefing
Slide 37: A Decade of EBIT Growth
A Decade of EBIT Growth For personal use only $800 $700 $600 $500 AUD $m $400 Half 2 Half 1 A $300 $200 $100 $- 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Half 1 $ 28 $ 78 $ 103 $ 107 $ 132 $ 151 $ 245 $ 271 $ 319 $ 331 Half 2 $ 60 $ 128 $ 144
Slide 38: Half Year Results Continue Growth Story
Half Year Results Continue Growth Story For personal use only Half year ended 31 March (A$M) 2010 2009 % Sales 1,661.2 2,215.6 (25.0) EBITDA 404.4 395.8 2.2 EBITDA margin (%) 24 3% 24.3% 17 9% 17.9% 35 8 35.8 EBIT 331.2 319.0 3.8 EBIT margin (%) 19.9% 14.4% 38.2 Orica Mining Services – 20
Slide 39: EBIT: Orica Mining Services
EBIT 4% Orica Mining Services For personal use only Sales $1,661M; EBIT $331M; Average Operating Net Assets $2,764M Continued productivity improvements and Lower volumes impacted by softness in the flow through of benefits from North American thermal coal markets and restructuring activity und
Slide 40: Controlling the Controllables
Controlling the Controllables 2008 First Half v 2010 First Half For personal use only 30% ne (%) 20% m 2008 baselin 10% Movement from 0% Average Exchange Sales EBIT Trade Working Capital Cash from Operations Rate (USD) -10% -20% -30% Continued focus on productivity, margin improvement and cash. Oric
Slide 41: Agenda
1. Introduction / Overview For personal use only 2. Managing Through the GFC 3. Financial Performance Break: Afternoon Tea 4. Growth Trends 5 G 5. Growth th Levers L 6 Summary and Questions 6. Orica Mining Services – 2010 Investor Briefing
Slide 42: Agenda
1. Introduction / Overview For personal use only 2. Managing Through the GFC 3. Financial Performance Break: Afternoon Tea 4. Industry Trends 5 G 5. Growth th Levers L 6 Summary and Questions 6. Orica Mining Services – 2010 Investor Briefing
Slide 43: Long Term Industry Trends
Long Term Industry Trends For personal use only • Growth in commodity volumes • Increasingg strip p ratios • Reducing ore grades • Stricter safety and security regulations • Increasing mining activities in new geographies 10.0% e growth % CAGR 9.0% 8 0% 8.0% 7.0% 6.0% 6.0% 5.2% 5.0% 5.0% 4.3% 4 0% 4
Slide 44: Agenda
1. Introduction / Overview For personal use only 2. Managing Through the GFC 3. Financial Performance Break: Afternoon Tea 4. Industry Trends 5 G 5. Growth th Levers L 6 Summary and Questions 6. Orica Mining Services – 2010 Investor Briefing
Slide 45: Multiple Growth Levers
Multiple Growth Levers For personal use only • Satisfaction of increased customer demand • Increased participation in new geographies • Mergers and acquisition • g expansion Manufacturing p • Continued focus on technology and innovation Orica Mining Services – 2010 Investor Briefing
Slide 46: Increased Participation in New Geographies
Increased Participation in New Geographies For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 47: Recent North American Acquisition
Recent North American Acquisition For personal use only • Acquisition completed July 1, 2010 to purchase commercial mining, construction and seismic explosives business in Canada and the USA of the Black Explosives group • Purchased remaining 50% of Bulk Explosives Limited Joint Venture • Includes d
Slide 48: Agenda
1. Introduction / Overview For personal use only 2. Managing Through the GFC 3. Financial Performance Break: Afternoon Tea 4. Industry Trends 5 G 5. Growth th Levers L (Continued) 6 Summary and Questions 6. Orica Mining Services – 2010 Investor Briefing
Slide 49: Manufacturing Expansion
Manufacturing Expansion For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 50: Ammonium Nitrate, Bontang, Indonesia
Ammonium Nitrate For personal use only Bontang, Indonesia • Construction tracking to plan • Project approximately 45% complete • Total project cost of approximately $550M (USD) • Commissioning planned for second half of 2011 calendar year • Capacity of 300ktpa Orica Mining Services – 2010 Investor B
Slide 51: Ammonium Nitrate, Bontang, Indonesia (photos)
Ammonium Nitrate For personal use only Bontang, Indonesia Photo captions: Compressor Unloading Process Gas Cooler Unloading Prill Tower Orica Mining Services – 2010 Investor Briefing
Slide 52: Ammonia, Kooragang Island, Australia
Ammonia For personal use only Kooragang Island, Australia • Currently 290ktpa of ammonia capacity • Uprate project: • Uprate of 65ktpa • Cost of approximately $110M (AUD) • Planned commissioning in late 2011 • Uprated capacity will be sufficient to support the proposed AN plant expansion to 750ktpa
Slide 53: Ammonia, Kooragang Island, Australia
Ammonia For personal use only Kooragang Island, Australia Orica Mining Services – 2010 Investor Briefing
Slide 54: Ammonium Nitrate, Kooragang Island, Australia
Ammonium Nitrate For personal use only Kooragang Island, Australia • Currently 430ktpa of AN capacity • Uprate p p project j • Proposed uprate to 750ktpa • Board approved spend of $75M (AUD) to complete engineering plans and order long lead items • Based on current demand outlook (approx. 8% annual
Slide 55: Latin America Ammonium Nitrate Expansion
Latin America For personal use only Ammonium Nitrate Expansion • Working W ki on severall options ti ffor AN capacity it expansion in Latin America • Preferred location is Marcona Marcona, Peru • Marcona is the site of a proposed ammonia/urea complex by CF Industries • Orica's proposal in Peru has b
Slide 56: Growth – MMU Manufacture, BQX Joint Venture, China
Growth – MMU Manufacture For personal use only BQX Joint Venture, China • Joint Venture (Orica 51%) to fabricate MMU’s in China • The BQX joint venture will strengthen Orica’s position in the expanding open cut mining market in China C • The jjoint venture will also have export p capability and meet
Slide 57: Non-electric Detonators, HONCE, China
Non-electric Detonators For personal use only HONCE, China • Joint Venture (Orica 51%) with Nanling to manufacture specific Non-electric detonators for the Chinese underground & tunnelling markets • The Chinese explosives market for Non-electric detonators has grown at a rapid rate since 2000 • The
Slide 58: Agenda
1. Introduction / Overview For personal use only 2. Managing Through the GFC 3. Financial Performance Break: Afternoon Tea 4. Industry Trends 5 G 5. Growth th Levers L (Continued) 6 Summary and Questions 6. Orica Mining Services – 2010 Investor Briefing
Slide 59: Key Message Last Year: Commitment to R&D
Key Message Last Year: Commitment to R&D For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 60: Wireless Initiation Systems
Wireless Initiation Systems For personal use only • 5th Generation Electronic Blasting Systems is completely wireless • Standard i-kon detonator inside special receiver • One way communication through rock, significant distance from blast box • Potential to deliver improvements to safety, productivi
Slide 61: Technology Revolutions in Initiation Systems
Technology Revolutions in Initiation Systems For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 62: For personal use only
For personal use only Wired blast showing in-hole and surface wires Wireless blast with no wires of any kind Orica Mining Services – 2010 Investor Briefing
Slide 63: For personal use only
For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 64: Wireless Initiation Systems
Wireless Initiation Systems For personal use only • Patented widely with respect to the device itself and also its deployment in particular mining applications • The technology is in the prototype phase and we will continue to develop the technology gy in order to enable its commercialisation in 201
Slide 65: Blast Based Services: Unlocking Value
Blast Based Services: For personal use only Unlocking Value • A suite of service based offerings • Enables enhanced productivity, growth, and environmental outcomes for customers • Our Blast Based Services capabilities include a comprehensive range of: – Technology & Tools – Qualityy Services – Adva
Slide 66: Advanced Blast Modelling
Advanced Blast Modelling For personal use only Enables Additional Value to be Realised Orica Mining Services – 2010 Investor Briefing
Slide 67: For personal use only
For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 68: For personal use only
For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 69: For personal use only
For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 70: Message Last Year: New Tunnelling Technology
Message Last Year: New Tunnelling Technology For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 71: Faster Project Completion: Railway Project, South Korea
Faster Project Completion: For personal use only Railway Project, South Korea • A new 6.5km section of railway in South Korea includes development of 3.5km’s of tunnel • 200m section of tunnel was 68m from a sensitive facility and 500m from residential zone • Veryy strict vibration and noise limits
Slide 72: Productivity For Customers: Chile
Productivity For Customers: For personal use only Chile • Blast Based Services ‘Rock on Ground’ and ‘Rock to Specification’ account, with KPI payment incentive • Contract focuses on fragmentation, drill and shovel productivity plus wall control • Achievement of KPI’s: • Fragmentation - fines • Fragm
Slide 73: Productivity For Customers: Stratablast
Productivity For Customers: For personal use only Stratablast™ • Mining method combining several drill & blast cycles into one cycle • Different types of blasts are done simultaneously • Layers of overburden & coal fired together but with different outcomes, eg “throw” vs “stand-up” • Continues to o
Slide 74: Productivity For Customers: Stratablast
Productivity For Customers: For personal use only Stratablast ™ 1 • For each coal seam to be recovered a separate drill recovered, 2 and blast cycle has traditionally been required • Enabled by Stratablast™, this can now be achieved in 3 one cycle cycle. • Some coal seams can now b recovered be d wh
Slide 75: Productivity For Customers: Stratablast
Productivity For Customers: For personal use only Stratablast™ Situation: • Small mine in NSW uneconomical g - 25 to 30% • Coal loss ranged • Thin coal seams not being recovered • High stripping ratio (1:13) • Poor coal quality due to dilution Summary achievements: • eliminated li i d coall lloss an
Slide 76: Engineering Process (Global)
Engineering Process (Global) For personal use only • Creation and mobilisation of bulk explosives manufacturing & delivery assets is a success driver • Four main initiatives driven from global review: • Restructure & globalisation of Engineering • Standardisation of Bulk Delivery Systems • Globalise
Slide 77: Enhanced Customer Relationships
Enhanced Customer Relationships For personal use only • Focus on customer intimacy and delivering value aligned to needs • S t Systematic ti program in i place l tto regularly l l capture t “V “Voice i off C Customer” t ” • Granular assessment of feedback to assess and monitor customer sentiment • M
Slide 78: Agenda
1. Introduction / Overview For personal use only 2. Managing Through the GFC 3. Financial Performance Break: Afternoon Tea 4. Industry Trends 5 G 5. Growth th Levers L 6 Summary and Questions 6. Orica Mining Services – 2010 Investor Briefing
Slide 79: Summary
Summary For personal use only • Global Leader • Emerging from the GFC in good shape • Step change in business operating efficiency ffi i • Strategically well positioned • Geographic footprint • Technology • Customer value focus • Excellent Growth Potential • Manufacturing expansions underway • Conti
Slide 80: Questions
Questions For personal use only Orica Mining Services – 2010 Investor Briefing
Slide 81: Disclaimer
Disclaimer For personal use only 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 as the