Dyno Nobel Limited · ASX:DNL
Dyno Nobel — Incitec Pivot — FY2006 Earnings Presentation
29 slides from Dyno Nobel's earnings presentation, November 2006
Slide 1: Incitec Pivot Limited 2006 Annual Results Presentation
Incitec Pivot Limited 2006 Annual Results Presentation
Slide 2: Julian Segal, Managing Director and CEO
JULIAN SEGAL Managing Director and CEO 2
Slide 3: 2006: Getting things done
2006: Getting things done Business turnaround driven by management action (“Tardis”) rather than external factors: • cost reduction • efficient manufacturing performance • focus on value not just volume • financial discipline Turnaround created the opportunity to add further value for shareholders •
Slide 4: Key financials
Full year results summary Key financials A$M 2006 2005* Change Before individually material items: Sales Revenue 1,111.2 1,073.9 3% EBIT 126.2 77.9 62% NPAT 82.8 47.9 73% RONA 18.0% 11.3% Ç EBIT Margin 11.4% 7.3% Ç NPAT incl. individually material items 46.7 14.5 222% * adjusted for AIFRS Tardis pha
Slide 5: Shareholder returns
Full year results summary Shareholder returns 2006 2005 Change Before individually material items: Earnings per share(1) (cents) 146 82 78% Return on shareholders' funds (1) 16.0% 8.2% Ç Dividends per share (cps) 103 71 45% Share buy-back ($M) 165 Closing share price $ 25.87 $ 15.82 64% Acceptable r
Slide 6: Eastern Australia in drought
2006 Sales volume down 12.6% Eastern Australia in drought Sales down 5.9% due to seasonal factors: Winter crop - down 5% - patchy and late break, lack of in season rainfall resulting in drought Pasture markets - down 8% - good spring pasture growth in 2005 contracting sales and drought in the second
Slide 7: 2006 Rainfall
Géttifig things. done. 2006 Rainfall Rs gee Australian Government Bureau of Meteorology Australian Rainfall Deciles 1 October 2005 to 30 September 2006 Distribution Based on Gridded Data Product of the National Climate Centre
Slide 8: 2006 In Season Rainfall
2006 In Season Rainfall Australian Government Bureau of Meteorology Australian Rainfall Deciles i) 1 April to 30 September 2006 Distribution Based on Gridded Data \N Product of the National Climate Centre i . hitp//wnw bom gov.au Raintall Decile Ranges © Comenonwoalth of Australia 2006, Australian B
Slide 9: Business strategy - Tardis
Business strategy - “Tardis” Own the Product Lowest Cost Base Strong Financial Multi-Channels Discipline to Market Competitive returns to shareholders 9
Slide 10: Tardis phase one report card
Tardis phase one report card: “Gear the business for acceptable returns in a poor year” 18.7% 3.1 18.0% 2.9 2.9 2.7 2.3 14.2% 82.8 90.7 RONA (%) FERT SALES (MT) 64.1 10.9% NPAT 11.3% 48.8 47.9 2002 2003 2004 2005 2006 * 2002 - 05 restated for AIFRS, all numbers pre individually material items 10
Slide 11: Tardis phase one report card: promised vs delivered
Tardis phase one report card: “Gear the business for acceptable returns in a poor year” What we promised What we delivered Lowest cost base • 2006: $30M (+50% up on target) • 2006 delivery: $20M • 2006 exit rate: $25M • 2006 exit rate: $38M (+52%) Own the product • SCF acquisition completed • Manufa
Slide 12: Tardis phase one report card: promised vs delivered
Tardis phase one report card: “Gear the business for acceptable returns in a poor year” What we promised What we delivered Multi-channels to • ELF supply agreement signed market February 2006 Focus on value, • Recovery in prices to import- not just volume parity levels • Market share optimised at 65
Slide 13: Tardis phase one report card: capital management
Tardis phase one report card: “Gear the business for acceptable returns in a poor year” What we promised What we delivered Disciplined capital • $102M reduction in trade working management capital (1) (2) • 2006 sustenance capital 76% of depreciation without impacting plant reliability Disciplined a
Slide 14: Tardis phase one report card: EPS and returns
Tardis phase one report card: “Gear the business for acceptable returns in a poor year” What we promised What we delivered Competitive EPS EPS up 78% to 146 cps (1) growth Return excess funds to • Dividend yield 6.5% (2) shareholders • 65% (1) dividend pay-out of NPAT • $165M share buy-back complete
Slide 15: James Fazzino, Finance Director and CFO
JAMES FAZZINO Finance Director and CFO 15
Slide 16: EBIT Reconciliation 2005 to 2006
EBIT Reconciliation: 2005: $77.9M, 2006: $126.2M 140 30.1 21.8 126.2 130 120 (7.1) 35.6* 110 $M EBIT 100 (25.1) 90 77.9 80 3.5 70 60 (10.5) 50 2005 EBIT 2006 EBIT Demolition SCF Trading Volume Rebates Manufacturing Restructuring margin /other margin “own the product” “lowest cost base” * Includes $1
Slide 17: 2006 Individually material items
Incitec Pivot 2006 Individually material items - A$M after tax Business restructuring costs (6.4) Cockle Creek closure (22.0) Elders settlement (7.7) Orica separation (3.7) SCF integration & restructuring (4.7) Profit on sale of QGC shares 8.4 Total (36.1) Costs capitalised: Buyback costs - charged
Slide 18: Southern Cross Fertilisers Earnings
Southern Cross Fertilisers Earnings – August & September 2006 12 10.8 10 8 (2.3) 6.0 $M 6 (2.6) 4 2 0.8 (5.2) 0 Eliminations Tax Underlying Underlying Reported Interest NPAT NPAT EBIT EPS positive day 1, >18% RONA from day 1 Aug/Sept 06 EBITDA $12.1M 18
Slide 19: Southern Cross Fertilisers Production
Southern Cross Fertilisers Production – kte Previous IPL Ownership Ownership 1,001 920 922 918 943 884 264 249 12 months 12 months 12 months 3 months to Dec'03 To Dec'04 To Dec'05 Aug - Oct 06 Sulphuric Acid Ammonium Phosphate Reliable Production 19
Slide 20: Trade working capital
Disciplined capital management Trade working capital • $102M improvement in trade working capital in the base business $236M $216M SCF $210M $39M $114M 2003 2004 2005 2006 20
Slide 21: Capital spending
Disciplined capital management Capital spending 35 30.6 30 25.8 26.7 Future capital program 25 • Control sustenance spending at below 20 depreciation 15 30.830.8 26.2 26.2 20.2 20.2 10 • 2007: $5M in minor expansion to 5 drive manufacturing efficiencies (business 0 now above 18% RONA) 2004 2005 2006
Slide 22: Net debt
Disciplined capital management Net debt 155 275 • $147M reduction in underlying debt 93 174 • Gearing 42% (target band 40% - 45%) 102 45 54 2005 TWC Other 2006 Buy-back SCF 2006 AIFRS underlying net debt restated cash net debt 22
Slide 23: Tardis phase one improvements
Tardis phase one improvements A$M 2006 Exit rate FTE 11.4 13.8 Quick wins 8.0 8.0 Operations optimisation 10.7 16.2 TOTAL 30.1 38.0 2006 exit rate 52% above initial target 23
Slide 24: Tardis phase two improvements
Tardis phase two improvements 2007 2008 A$M Exit rate Exit rate Manufacturing efficiency 9.1 13.0 GI Gas 15.0 15.0 Supply chain optimisation 6.8 20.0 SCF efficiency# 20.0 35.0 TOTAL 50.9 83.0 Low risk, controllable EPS growth # SCF implementation costs $5.0M 24
Slide 25: Julian Segal, Managing Director and CEO
JULIAN SEGAL Managing Director and CEO 25
Slide 26: Tardis program summary
Tardis program summary 60 35 30 ? ? ? 20 13 15 8 Tardis #1 Returns SCF efficiency Balance of Manufacturing manufacturing GI gas Supply chain M&A Acquisition# Capital Tardis #1 World scale efficiency SCF Phase 1: Gear the Phase 2: Drive EPS growth Phase 3: business for acceptable through internal ini
Slide 27: Tardis culture program
Tardis culture program • New beginnings workshops • New values and behaviours Getting things done 27
Slide 28: 2007 Outlook
Incitec Pivot 2007 Outlook 8 Gibson Island planned maintenance shut ? Challenging seasonal conditions 9 Full year of SCF 9 Balance of Tardis phase one 9 Tardis phase two Continued earnings momentum 28
Slide 29: Incitec Pivot
( Incitec Pivot a