Iluka Resources Limited · ASX:ILU
Iluka Resources — H1 2015 Earnings Presentation
39 slides from Iluka Resources's earnings presentation, Aug 18, 2015
Slide 1: 2015 Half Year Results
Iluka Resources Limited For personal use only 2015 Half Year Results David Robb, Managing Director Doug Warden, Chief Financial Officer and Head of Strategy and Planning Matthew Blackwell, Head of Marketing, Minerals Sands 18 August 2015
Slide 2: Disclaimer – Forward Looking Statements
Disclaimer – Forward Looking Statements For personal use only Forward Looking Statements This presentation contains certain statements which constitute “forward-looking statements”. These statements include, without limitation, estimates of future production and production potential; estimates of fu
Slide 3: Key Features
Key Features For personal use only • Higher production and forecast full year sales • Safe, efficient reactivation of mine and synthetic rutile capacity • Unit cash cost efficiencies • Mineral sands A$ margin expansion – cost and currency benefits • Free cash flow generation • Dividend payment – 6 c
Slide 4: Main Features 1H 2015 versus 1H 2014
Main Features 1H 2015 versus 1H 2014 For personal use only Mineral Sands Sales Volumes - Z/R/SR sales down 0.4%, higher SR and zircon sales offset by lower rutile sales Mineral Sands Revenue 2.0% - increased A$ revenue per tonne reflecting the lower AUD:USD exchange rate Cash Costs of Production
Slide 5: Sustainability
Sustainability For personal use only Frequency Rate 16 15.1 Total Recordable Injury Frequency Rate (TRIFR) 14 Lost Time Injury Frequency Rate (LTIFR) 12 10.5 10 8 6 4.6 4.2 4 3.6 3.1 1.9 2 0.9 0.6 0.3 0 2011 2012 2013 2014 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15
Slide 6: Interim Dividend
Interim Dividend For personal use only • 6 cents interim dividend fully franked payable 29 September 2015 • Equals 64 per cent of 1H free cash flow • Cumulative 68 per cent of free cash flow since recommencement of dividends at end 2010 Distribution Metrics 1H 2015 free cash flow pay out ratio (%) 6
Slide 7: Summary Group Results
Summary Group Results For personal use only 1H 2015 $m 1H 2015 2H 2014 1H 2014 vs 1H 2014 % change Mineral sands revenue 349.6 381.7 343.2 2.0 Mineral sands EBITDA 114.4 130.7 107.9 6.0 Mining Area C royalty 39.0 28.4 38.0 2.6 Group EBITDA 127.2 131.2 125.8 1.1 Group EBITDA margin % 32.7 32.0 33.0 (
Slide 8: Mining Area C Royalty
Mining Area C Royalty 1H 2015 versus 1H 2014 For personal use only 1H 2015 vs 1H 2014 1H 2015 1H 2014 % change Sales volumes mdmt 27.5 25.9 6.4 Implied price A$/t 74.8 114.3 (34.5) Net Royalty income $m 25.6 37.0 (30.9) Annual capacity payments1 $m 3.0 1.0 200.0 Agreement modification one-off receip
Slide 9: Net Profit after Tax
Net Profit after Tax 1H 2015 versus 1H 2014 For personal use only EBITDA increased $1.4 million to $127.2 million Group EBITDA margin 32.7 per cent $m 40 50 35 30 (9) - 2 25 10 (4) 20 20 (8) (2) 1 15 12 (7) (2) 10 5 0 (5) (10) (23) - - (15) (20) 30 June Price Volume Mix FX Ilm & Oth Unit costs Restr
Slide 10: Net Debt Movement
Net Debt Movement 1H 2015 For personal use only 1H 2015 free cash inflow $39.0 million FX and $m Opening net Purchase of amortised Closing net debt Operating Metalysis Other share borrowing debt 30 June 31 Dec 2014 cash flow MAC royalty Exploration Interest Tax Capex shares Asset sales purchases Div
Slide 11: Unit Cash Costs and Revenue
Unit Cash Costs and Revenue For personal use only Production, Revenue per tonne Sold and Unit Cash Costs kt $/tonne 1,600 1600 1,400 1400 $1130/t 1,200 $1030/t 1200 1,000 1000 800 $668/t 800 $616/t 600 600 400 400 200 200 - 0 2011 2012 2013 2014 1H 2015 Synthetic rutile Production Rutile Production
Slide 12: Inventory
Inventory For personal use only $m 900 800 700 $5.5m 600 500 400 300 $23.1m 200 100 0 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Work in Progress Finished Goods • Total inventory at 30 June 2015 was $827.8 million (31 December 2014: $810.2 m
Slide 13: Balance Sheet
Balance Sheet For personal use only Net Debt, Gearing and Funding Headroom • Balance sheet strength maintained – net debt (as at 30 June 2015) of $80.2 million – gearing (net debt/net debt + equity) 5.4 per cent – undrawn facilities of $784.9 million with total facilities of $950.0 million – $100.0
Slide 14: Sources and Uses of Cash
Sources and Uses of Cash For personal use only A$m Gearing (%) 800 50 40 600 30 400 20 200 10 - - (10) (200) (20) (400) (30) (600) (40) (800) (50) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Cash from operations Disposals Equity issued Net debt drawn Net capex Acquisitions Divid
Slide 15: Zircon Market Update
Zircon Market Update For personal use only • Zircon sales up 5 per cent on previous corresponding period • 1H 2015: 153.4 thousand tonnes (1H 2014: 146.3 thousand tonnes) • 2015 sales 2H weighted per usual seasonal patterns Americas EMEAI China / Asia 1H 2014 vs 1H 2015 Sector Sales Ceramics Zirconi
Slide 16: Zircon Market Update
Zircon Market Update For personal use only REGION • US markets exhibiting variable demand Americas • Despite Virginia idling, Iluka continues to be supported by key accounts Europe / • Weaker Euro benefiting European exporters - increased sales expected from select customers Middle East / • Spanish
Slide 17: High Grade Feedstocks Market
High Grade Feedstocks Market For personal use only • Rutile / synthetic rutile sales: 1H 2015: 122.5 thousand tonnes (1H 2014: 130.8 thousand tonnes) • Increased sales of HGO1 in Americas and Asia partially offsetting declines in EMEAI Americas EMEAI China / Asia 1H 2014 vs 1H 2015 Sector Sales 84 k
Slide 18: Titanium Feedstock Market
Titanium Feedstock Market For personal use only REGION • Sales stable and fundamentals exist for increased demand Americas ‒ US existing home sales and renovations strong • New pigment capacity coming on line expected to increase demand for feedstocks Europe / • Capacity utilisation quoted as high 8
Slide 19: Low Grade Feedstocks
Low Grade Feedstocks Chloride and sulphate ilmenites For personal use only • Americas and EMEAI sales strong vs weak China market Americas EMEAI China / Asia 1H 2014 vs 1H 2015 Sector Sales 145 kt Pigment 92 kt 77 kt Welding 1H 2015 1H 2014 37 kt 31 kt Ti Sponge / Other 1H 2014 1H 2015 1H 2014 1H 20
Slide 20: Titanium Customer Offering
Titanium Customer Offering For personal use only • Iluka is unique in that it can offer customers a full range of titanium product grades • Committed to providing benefits to customers through technical collaboration • China Technical Centre development continues – site selection delayed to accommod
Slide 21: Marketing Update
Marketing Update For personal use only • Production – flexible, demand following • Sales strategy – continued focus on volume growth in line with market demand • Focused – on sectors and geographies where Iluka can bring additional value • First mover – will continue to position in markets/segments
Slide 22: Preserve / Advance Growth Opportunities
Preserve / Advance Growth Opportunities For personal use only EXPLORATION INTERNAL PROJECTS MARKET DEVELOPMENT INNOVATION & TECHNOLOGY Australian and international Cataby: Zircon pricing framework ASSR: - DFS completed - production 1H 2016 $11m spend in 1H 2015 - timing flexibility China Technical C
Slide 23: Potential Acquisition of Kenmare Plc
Potential Acquisition of Kenmare Plc For personal use only • A non-binding proposal relating to potential acquisition of Kenmare – all-share exchange offer – Kenmare shareholders to receive 0.016 new Iluka shares for each Kenmare share • If implemented, the potential combination of Iluka and Kenmare
Slide 24: Business Characteristics - 2H 2015
Business Characteristics - 2H 2015 For personal use only • 2015 full year guidance parameters maintained: – Z/R/SR production higher than 2014 – Z/R/SR sales may exceed 2015 production and 2014 sales • Sales expected to be 2H weighted • Free cash flow expected to be 2H weighted • Lower unit cash cos
Slide 25: Iluka Approach
Iluka Approach For personal use only • Focus on shareholder returns through the cycle • Flex asset operation in line with market demand • Continue market development through the cycle • Preserve/advance mineral sands growth opportunities • Maintain a strong balance sheet • Continue to evaluate/pursu
Slide 26: Supplementary Slides
For personal use only Supplementary Slides
Slide 27: Reconciliation of Non-IFRS Financial Information to Profit before Tax
Reconciliation of Non-IFRS Financial Information to Profit before Tax For personal use only Non-IFRS financial measures of Mineral sands EBITDA, Mineral sands EBIT, Group EBITDA and Group EBIT are highlighted in the table below, together with profit before tax. Exploration Mineral $m AUS US MAC Corp
Slide 28: Production Volumes
Production Volumes For personal use only kt 1H 2015 1H 2014 % change Zircon 163.3 174.0 (6.1) Rutile 56.2 78.1 (28.0) Synthetic rutile 57.4 - n/a Total Z/R/SR production 276.9 252.1 9.8 Ilmenite – saleable and upgradeable 195.1 226.8 (14.0) Total production volume 472.0 478.9 (1.4) Heavy mineral con
Slide 29: Sales Volumes
Sales Volumes For personal use only kt 1H 2015 1H 2014 % change Zircon 153.4 146.3 4.9 Rutile 59.1 95.5 (38.1) Synthetic rutile 63.4 35.3 79.8 Total Z/R/SR 275.9 277.1 (0.4) Ilmenite 159.5 221.8 (28.1) Total sales volumes 435.4 498.9 (12.7) 29
Slide 30: Mineral Sands Results
Mineral Sands Results For personal use only $m 1H 2015 1H 2014 % change Mineral sands revenue 349.6 343.2 2.0 Australia EBITDA 148.7 121.4 22.5 United States EBITDA (6.2) 9.8 (163.3) Exploration and other EBITDA (28.1) (23.3) (20.6) Total mineral sands EBITDA 114.4 107.9 6.0 Depreciation and amortis
Slide 31: Unit Cash Costs and Revenue per tonne
Unit Cash Costs and Revenue per tonne For personal use only 1H 2015 1H 2014 % change Total Z/R/SR production kt 276.9 252.1 9.8 Ilmenite – saleable and upgradeable kt 195.1 226.8 (14.0) Total production kt 472.0 478.9 (1.4) Total cash costs of production $m 175.5 200.7 12.6 Unit cash costs per tonne
Slide 32: Cash Flow and Net Debt
Cash Flow and Net Debt For personal use only 1H 2015 $m 1H 2015 1H 2014 2H 2014 vs 1H 2014 % change Opening debt (59.0) (206.6) (155.2) 71.4 Operating cash flow 92.1 101.9 152.9 (9.6) MAC royalty 26.7 40.9 34.3 (34.7) Exploration (11.5) (8.6) (13.5) (33.7) Interest (net) (5.6) (6.8) (6.0) 17.6 Tax (
Slide 33: Capital and Exploration Expenditure (cash)
Capital and Exploration Expenditure (cash) For personal use only $m 1H 2015 1H 2014 % change Capital expenditure 35.5 23.6 50.4 Metalysis 4.1 18.6 (78.0) Exploration 11.5 8.6 33.7 Total 51.1 50.8 0.6 33
Slide 34: Summary Group Operations
Summary Group Operations For personal use only 1H 2015 1H 2014 % change Production volumes Zircon kt 163.3 174.0 (6.1) Rutile kt 56.2 78.1 (28.0) Synthetic rutile kt 57.4 - n/a Total Z/R/SR production kt 276.9 252.1 9.8 Ilmenite kt 195.1 226.8 (14.0) Heavy mineral concentrate produced kt 632 676 (6.
Slide 35: Australian Operations
Australian Operations For personal use only 1H 2015 1H 2014 % change Production volumes Zircon kt 146.4 158.3 (7.5) Rutile kt 56.2 78.1 (28.0) Synthetic rutile kt 57.4 - n/a Total Z/R/SR production kt 260.0 236.4 10.0 Ilmenite kt 128.9 167.7 (23.1) Total production kt 388.9 404.1 (3.8) Heavy mineral
Slide 36: US Operations
US Operations For personal use only 1H 2015 1H 2014 % change Production volumes Zircon kt 16.9 15.7 7.6 Ilmenite kt 66.2 59.1 12.0 Total production kt 83.1 74.8 11.1 Heavy mineral concentrate produced kt 106 112 (5.6) Heavy mineral concentrate processed kt 113 111 1.7 Unit cash cost of production $/
Slide 37: Debt Facilities
Debt Facilities For personal use only Iluka Debt Facilities and Maturity Profile • Significant funding headroom – undrawn facilities of A$784.9 million as at 30 June 2015 – cash and cash equivalents of A$79.3 million • Total facilities of A$950.0 million with majority not maturing until 2019 – USPP
Slide 38: Potential Acquisition of Kenmare Plc – Important Notices
Potential Acquisition of Kenmare Plc For personal use only IMPORTANT NOTICES The Directors of Iluka accept responsibility for the information contained in Slide 23 and the 30 April 2015 Iluka ASX Release (collectively, the Announcement). To the best of their knowledge and belief (having taken all re
Slide 39: Iluka Resources Limited – For more information contact
Iluka Resources Limited For personal use only For more information contact: Dr Robert Porter, General Manager Investor Relations robert.porter@iluka.com +61 3 9225 5008 / +61 (0) 407 391 829 www.iluka.com