Slide 1: 2012 Half Year Results Announcement
For personal use only 2012 Half Year Results Announcement 7 May 2012
Slide 2: Disclaimer
Disclaimer Forward looking statements This presentation has been prepared by Orica Limited. The information contained in this presentation is for For personal use only informational purposes only. The information contained in this presentation is not investment or financial product advice and is not
Slide 3: Presentation outline
Presentation outline For personal use only Group performance Ian Smith Divisional performance Noel Meehan Balance Sheet & Cashflow Noel Meehan Orica’s Growth Platform Ian Smith Orica Half Year Results 2012 Slide 2
Slide 4: Sustainability
Sustainability For personal use only PERFORMANCE • No fatalities INDICATORS • Improvement in AWRCR1 (1st Half 2012 0.37 vs 1st Half 2011 0.53) • Corporate Affairs and Social Responsibility Group established • Increased focus on high potential incidents PRIORITIES • Proactively working with regulator
Slide 5: Financial Performance – Group EBIT Down 4%
Financial Performance – Group EBIT Down 4% For personal use only Stronger demand from mining markets and margin improvements were offset by plant shutdown costs and foreign exchange Slide 4
Slide 6: Orica Mining Services EBIT
Orica Mining Services EBIT $ 6% Sales $2,134M; EBIT $313M; Average Operating Net Assets $3,435M For personal use only A$M 500 17 (87) 450 40 68 400 (27) 350 (19) 335 (14) 313 300 250 200 2011 EBIT Volume Net Price Monclova Plant Kooragang Fixed costs / FX AN / Ammonia 2012 EBIT Closure Island Depn.
Slide 7: Minova EBIT
Minova EBIT # 2% Sales $433M; EBIT $57M; Average Operating Net Assets $1,491M For personal use only A$M 80 70 1 (9) 5 6 60 (1) 57 55 50 40 2011 EBIT Volume Productivity Other Price FX 2012 EBIT Higher volumes in Australia and CIS, partly offset by Selling prices remain under pressure in North su
Slide 8: Chemicals EBIT
Chemicals EBIT # 1% Sales $805M; EBIT $96M; Average Operating Net Assets $839M A$M For personal use only 115 110 1 (7) 12 105 1 (3) 100 (3) 96 95 95 90 85 80 2011 EBIT Mining Watercare General Productivity Kooragang FX 2012 EBIT Chemicals Chemicals Island impact Strong market conditions for Mining
Slide 9: Cash flow
Cash flow For personal use only Half Year ended 31 March (A$M) 2012 2011 $ 2 Comments EBITDA 537.1 547.2 (10.1) $ - $90M impact from KI plant closures Net interest paid (83.4) (67.8) (15.6) $ - Higher debt levels after SPS buyback Net tax paid (72.9) (129.7) 56.8 # - Timing and lower tax rate Trade
Slide 10: Rolling TWC to Rolling Sales %
Rolling TWC to Rolling Sales % For personal use only 20.0% 19.0% 18.0% 17.0% Rolling TWC / Sales % 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% HY03 FY03 HY04 FY04 HY05 FY05 HY06 FY06 HY07 FY07 HY08 FY08 HY09 FY09 HY10 FY10 HY11 FY11 HY12 Disciplined management of TWC maintained Orica Half Year Results
Slide 11: Growth capital (excluding M&A)
Growth capital (excluding M&A) For personal use only Capital expenditure ACT HY121 Major expansion capital projects >A$10M: Bontang Nanling 75 Kooragang Island Other expansion capital projects 102 Total expansion capital expenditure 177 Total sustenance capital expenditure 97 1. Excludes capitalised
Slide 12: Capital management – key measures
Capital management – key measures For personal use only Half year ended 31 March 2012 2011 Net Debt (A$M) 2,297.9 1,318.2 Net Interest Expense (A$M) 65.3 62.5 Interest Cover (times) 6.4 7.0 Operating Cash ($) 38.8 141.8 Cash Conversion (%) 46.4 65.4 Rolling TWC to Rolling Sales (%) 13.0 13.0 Gearing
Slide 13: Drawn Debt Maturity Profile
Drawn Debt Maturity Profile For personal use only A$M 700 600 500 400 300 200 100 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2022 2025 2030 Average tenor of drawn debt of 5.0 years Orica Half Year Results 2012 Slide 12
Slide 14: 2012 Hedging
2012 Hedging Hedging position for H2 2012 (major currencies only): For personal use only Foreign currency* Exposure Effective hedged % • USD 73% 70% • CAD 4% 39% • NZD 4% 54% • CNY 3% 72% Total currency exposure 56% * Net of all long and short positions in that currency 80 – 85% of all AUD/USD expos
Slide 15: Environmental provisions
Environmental provisions Environmental Spend (A$M) ACT HY12 EST 2012 EST 2013 EST 2014 EST 2015 For personal use only Major environmental spend: Botany Groundwater remediation 1 6 12 13 13 13 HCB remediation 2 15 26 2 2 2 Botany mercury remediation 5 6 12 - - Other 2 17 28 18 2 Total environmental s
Slide 16: Orica's Continued Growth Platform
For personal use only Orica’s Continued Growth Platform
Slide 17: Orica's Continued Growth Platform
Orica’s Continued Growth Platform For personal use only Group EBIT 2 Revenue by Region 1 EBIT by Industry 2 1. 2011Full year revenue 2. 2011 Full year EBIT Page 16
Slide 18: Pilbara Joint Venture
Orica’s Continued Growth Platform Pilbara Joint Venture1 For personal use only Unique opportunity to establish a leading position in a high growth market with reduced capital risk 1. Transaction still subject to conditions including formal legal documents being entered into by the proposed joint ven
Slide 19: Orica's Continued Growth Platform
Orica’s Continued Growth Platform For personal use only Group EBIT 2 Revenue by Region 1 EBIT by Industry 2 1. 2011Full year revenue 2. 2011 Full year EBIT Page 18
Slide 20: Approximate Global Commodity Production
Orica’s Continued Growth Platform For personal use only Approximate Global Commodity Production Annual Growth Rates 2012-2016 References: 1. EIA and AME 2. 2011 Wood Mackenzie Copper Long Term Outlook 3. CRU, company reports, WBMS 4. CRU 5. AME 6. Orica Slide 19
Slide 21: Orica is positioned to grow independent of commodity volumes
Orica’s Continued Growth Platform For personal use only Orica is positioned to grow independent of commodity volumes increasing Increasing Strip Ratios and More Complex Geological Mining Conditions drive • growth in explosives volumes due to increased raw material to be moved • growth in explosives
Slide 22: Ultra-high Intensity Blasting: Customer Value Model
Ultra-high Intensity Blasting: Customer Value Model Soft Ore Bond Work Index (BWI) = 15 Hard Ore Bond Work Index (BWI) = 25 For personal use only • 4x increase in powder factor results in • 4x increase in powder factor results in • 40% increase in mill throughput • 28% increase in mill throughput •
Slide 23: Challenging geological formations in mines
Orica’s Continued Growth Platform Mines are facing increasingly frequent challenging geological formations For personal use only Thin & Intermittent Splitting Faulted Dipping “Through Seam Blasting” provides a solution to these by: • Increasing % of resource recovered • Reducing strip ratio • Provid
Slide 24: Through Seam Blasting – Demonstrated Results Case 1
Orica’s Continued Growth Platform Through Seam Blasting – Demonstrated Results For personal use only Case 1 • The mine faced difficult to mine dipping seams • The conventional approach required 10 individual blasts for 5m vertical advance • Orica used “Through Seam Blasting” and fired the full volum
Slide 25: Through Seam Blasting – Demonstrated Results Case 2
Orica’s Continued Growth Platform Through Seam Blasting – Demonstrated Results For personal use only Case 2 • Conventional approach required 15 blasts • Through Seam Blasting fired the same bulk volume in 3 shots Slide 24
Slide 26: Benefit delivered to the customer
Orica’s Continued Growth Platform Benefit delivered to the customer For personal use only Case 1 Case 2 • Generated savings of USD$0.35 per • Increase in 300,000t of coal production in 12 Bulk Cubic Meter months • Increased blasted inventory by 145% • Haulage fleet productivity increased by 150% • D
Slide 27: Orica's Sponsorship of GreenEDGE Cycling Teams
Orica’s Sponsorship of GreenEDGE Cycling Teams For personal use only A rare opportunity to team with a ground-breaking sporting venture with global coverage. The three teams sponsored will compete in more than 300 international events, 200 days of racing that cover 10 months per annum. This is a pla
Slide 28: Orica Restructure
Orica Restructure For personal use only Slide 27
Slide 29: Vision and Values
Vision and Values For personal use only Clever Resourceful Solutions Clever adjective skilful; talented; adroit; ingenious; quick to understand and learn Resourceful adjective full of resource; ingenious; skilful in overcoming difficulties No Accidents Today Succeed Through Collaboration Find Valuab
Slide 30: Supplementary Information
For personal use only Supplementary Information
Slide 31: Group financial performance overview
Group financial performance overview For personal use only Half year ended 31 March (A$M) 2012 2011 %2 Sales 3,290.7 2,949.3 11.6 # Gross margin 1,366.2 1,323.0 3.3 # EBITDA 1 537.1 547.2 (1.9) $ EBIT 418.7 437.0 (4.2) $ Net profit after tax 253.3 263.8 (4.0) $ Operating cashflow 38.8 141.8 (72.6) $
Slide 32: EBIT contribution by business platform
EBIT contribution by business platform 1 For personal use only March 2011 March 2012 Chemicals Chemicals Group Group 20% 21% Minova 11% Minova 12% Mining Mining Services Services 69% 67% 1. Excludes Corporate centre and other support costs Orica Half Year Results 2012 Slide 31
Slide 33: EBIT contribution by geography
EBIT contribution by geography For personal use only March 2011 March 2012 Other Other 1% Europe Europe 1% 10% 11% Latin Latin America America 12% Australia 13% 43% Australia 51% North America 12% North America 16% Asia 10% Asia New Zealand New Zealand 12% 4% 4% Orica Half Year Results 2012 Slide 32
Slide 34: Gross sales by geography
Gross sales by geography For personal use only March 2011 March 2012 Other Other Europe 2% Europe 2% 10% 11% Australia Australia 34% 34% Latin America Latin America 16% 15% North New Zealand New Zealand 3% North America 4% America 17% 19% Asia Asia 18% 15% Orica Half Year Results 2012 Slide 33
Slide 35: Gross margin growth
Gross margin growth 1 For personal use only A$M 3,200 2,800 2,400 2,000 1,600 1,200 800 +16.7% +19.9% +5.5% +3.3% +20.9% 400 +8.6% +10.3% +9.3% -6.7% 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Compound average growth rate since 2003 is 9.4% 1. Gross margin prepared on a continuing operation
Slide 36: Productivity - Half year
Productivity1 - Half year For personal use only 85% 80% 78.8% 77.4% 75.5% 75.9% 75% 73.5% 2 72.4% 71.9% 71.2% 70.9% 69.6% 70% 65% 60% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1. Productivity is measured as fixed costs (includes depreciation and amortisation) as a percentage of gross margin.
Slide 37: Net profit after tax
Net profit after tax 1 For personal use only A$M 700 DLX 600 500 400 300 200 +10.9% -10.0% +13.2% +15.0% -4.0% 100 +29.1% +26.0% +4.8% +22.8% 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Compound average growth rate since 2003 is 11.3% 1. Orica net profit after tax pre individually material i
Slide 38: EBIT by business
EBIT by business Mining Services 1 Minova 900 25% For personal use only 160 20% 800 140 700 20% 16% 120 EBIT MARGIN 600 EBIT MARGIN EBIT A$M 15% EBIT A$M 100 12% 500 400 80 10% 8% 300 60 200 5% 40 4% 100 20 0 0% 0 0% 2009 2010 2011 2012 2009 2010 2011 2012 1st Half EBIT 2nd Half EBIT EBIT Margin 1st
Slide 39: Orica Mining Services
Orica Mining Services For personal use only Half Year ended 31 March (A$M) 2012 2011 %2 Sales 2,134.2 1,825.2 16.9 # EBITDA 392.2 408.0 (3.9) $ EBITDA margin (%) 18.4% 22.4% (17.9) $ EBIT 313.0 334.5 (6.4) $ EBIT margin (%) 14.7% 18.3% (19.7) $ Orica Half Year Results 2012 Slide 38
Slide 40: Orica Mining Services by geography
Orica Mining Services by geography For personal use only Australia/Asia North America 500 140 120 400 100 EBIT A$M EBIT A$M 300 80 60 200 40 100 20 0 0 2009 2010 2011 2012 2009 2010 2011 2012 1st Half EBIT 2nd Half EBIT 1st Half EBIT 2nd Half EBIT EMET Latin America 100 140 120 80 100 EBIT A$M 60 EB
Slide 41: Minova
Minova For personal use only Half Year ended 31 March (A$M) 2012 2011 %2 Sales 433.0 410.8 5.4 # EBITDA 71.3 69.8 2.1 # EBITDA margin (%) 16.5% 17.0% (2.9) $ EBIT 56.6 55.4 2.2 # EBIT margin (%) 13.1% 13.5% (3.0) $ Orica Half Year Results 2012 Slide 40
Slide 42: Chemicals
Chemicals For personal use only Half Year ended 31 March (A$M) 2012 2011 %2 Sales 804.7 748.8 7.5 # EBITDA 116.9 113.4 3.1 # EBITDA margin (%) 14.5% 15.1% (4.0) $ EBIT 95.9 94.7 1.3 # EBIT margin (%) 11.9% 12.6% (5.6) $ Orica Half Year Results 2012 Slide 41
Slide 43: Corporate centre and other support services
Corporate centre and other support services For personal use only Half Year ended 31 March (A$M) 2012 2011 $ 2 Corporate centre costs (22.9) (23.8) 0.9 # Other support costs (23.9) (23.8) (0.1) $ Total costs (46.8) (47.6) 0.8 # Corporate centre and other support costs In line with prior year Orica
Slide 44: Cash Conversion
Cash Conversion 1 For personal use only Half Year ended 31 March (A$M) 2012 2011 EBITDA 537.1 547.2 TWC movement (190.5) (108.6) Sustenance (97.4) (80.7) Cash Conversion 249.2 357.9 Cash Conversion % 46.4% 65.4% 1. Cash conversion % impacted by the $90M EBITDA effect of the Kooragang Island plant cl
Slide 45: Changes to 2011 segment information – Mining Services
Changes to 2011 segment information – Mining Services For personal use only EBIT 2011 2011 Restated Original Disclosure Disclosure Australia/Asia 208 213 North America 32 32 Latin America 44 44 Emerging markets of CIS, Mongolia, EMET 21 26 Africa and China (referred to as Other 30 20 CISMAC) now rep
Slide 46: Net interest expense
Net interest expense For personal use only Half Year ended 31 March (A$M) 2012 2011 $ 2 Net interest expense 65.3 62.5 2.8 # Comprising: Interest on net debt 83.8 75.3 8.5 # Add: Unwinding of discount on provisions 2.9 4.9 (2.0) $ Add: Major external finance leases 0.4 0.6 (0.2) $ Less: Capitalised
Slide 47: Interest Cover
Interest Cover For personal use only Half Year ended 31 March (A$M) 2012 2011 $ 2 Financial expense 1 81.6 82.7 (1.0) $ Financial income (16.3) (20.2) 3.9 $ Net financing costs 65.3 62.5 2.9 # EBIT 418.7 437.0 (18.4) $ Interest Cover (times) 6.4 7.0 (0.6) $ 1. Financial expense in 2012 includes $21.
Slide 48: Impact of Step-Up Preference Securities (SPS) – earnings per share
Impact of Step-Up Preference Securities (SPS) – earnings per share For personal use only Reported per Accounts A$M Reported net profit 263.4 Less: Net profit attributable to non controlling interests (10.1) After tax distributions to SPS holders 1 (8.9) Adjusted net profit 244.4 Weighted average ord
Slide 49: Debt Profile (as at March 2012)
Debt Profile (as at 31 March 2012) For personal use only Drawn Debt Debt Maturity Profile Other, $31M A$M Drawn Undrawn Total < 1 year 136 126 262 Bank Loans, 1 – 2 years 537 8 545 $1,020M USPP, $1,379M 2 – 5 years 816 1,074 1,890 > 5 years 1,057 10 1,067 Export Total 2,546 1,218 3,764 Finance, $96M
Slide 50: Non IFRS information reconciliation
Non IFRS information reconciliation For personal use only Half year ended 31 March (A$M) 2012 2011 %2 Statutory profit after tax 253.3 263.8 (4.0) $ Adjust for the following: Net financing costs 65.3 62.5 4.5 # Income tax expense 90.0 97.3 (7.5) $ Non-controlling interests 10.1 13.4 (24.6) $ EBIT 41
Slide 51: Non IFRS disclosures and definitions
Non IFRS disclosures and definitions Term Definition NPAT Net profit after tax attributable to Orica Shareholders For personal use only EBIT Earnings before interest and tax EBITDA Earnings before interest, tax depreciation and amortisation EBIT margin EBIT / Sales EBITDA margin EBITDA / Sales Avera