Orica Limited · ASX:ORI
Orica — Investor Presentation (August 2006)
20 slides from Orica's investor presentation, Aug 30, 2006
Slide 1: Orica Mining Services Investor Update
Orica Mining Services Investor Update Philippe Etienne (CEO - Mining Services) Craig Elkington (CFO - Mining Services) 30 August 2006
Slide 2: Presentation outline
Presentation outline • Dyno Nobel (Dyno) update • Yarwun update • SE Asia update • North American update • Electronic Blasting Systems (EBS) update • Summary 2
Slide 3: Dyno – acquisition recap
Dyno – acquisition recap An outstanding opportunity to grow Orica Mining Services • Orica has acquired European, Middle Eastern, African, Asian and Latin American businesses of Dyno Nobel • Purchase for US$685M (A$900M million) on a debt free basis – Approx 11.1 times actual 2005 EBITDA – Approx 5.3
Slide 4: Dyno – acquisition rationale
Dyno – acquisition rationale The acquisition of Dyno Nobel’s EMEA, LATAM and Asian businesses is on track to deliver in line with the strategic intent Extended global footprint 4 Diversification of customer base 1 • All DN businesses acquired except for • No customers lost to date Australia and Nort
Slide 5: Geographical diversification
Geographical diversification Pre acquisition Post acquisition OMS revenue by geography OMS revenue by geography June 06 Act June 06 Act 10% 16% 14% 38% 43% 19% 33% 27% Asia Pacific North America Latin America EMEA 5
Slide 6: Dyno – initial impressions
Dyno – initial impressions Positive findings Opportunities for improvement • Well run businesses • Increase operating efficiency of the Dyno plants • Value was preserved by Dyno management team through the • Reduce raw material inputs & sale process improve purchasing leverage • Generally strong saf
Slide 7: Dyno – culture change
Dyno – culture change Areas for focus • Commercial ownership to be increased for Dyno Nobel employees, focus on generating value for total Orica • Build on strength of Dyno’s existing customer relationships • Continue to improve customer focus in the new integrated organisation • Introduce the Orica
Slide 8: Dyno – financial performance update
Dyno – financial performance update $Am 2006 EMEA Asia LatAm Y/E June 2006A Total Revenue 277 81 217 575 EBITDA 44 14 26 84 EBIT 35 10 21 66 2005 EBIT 37 9 17 63 Overview of Performance EMEA – the results have been slightly below expectations due to higher raw material costs which have not yet been
Slide 9: Dyno – AIFRS reported results
Dyno – AIFRS reported results The acquired businesses reported results will differ to previous estimates to comply with AIFRS requirements on: • Acquisition accounting adjustments • Proportionate versus equity accounting • Amortisation of intangibles These AIFRS adjustments will not affect the under
Slide 10: Dyno – synergy update
Dyno – synergy update Progress to date – August 2006 • Defined comprehensive list of projects to deliver synergies target • Closure of Oslo head office - functions transferred to Melbourne • Appointed former Dyno management to head EMEA and Latin American divisions • Decision to relocate European IS
Slide 11: Dyno – synergy update
Dyno – synergy update Pre-acquisition estimated Current split of expected Split of synergies (June ’05) synergies (August ’06) 33% 38% 32% 29% 35% 33% Oslo & Regional Gyttorp & LATAM Procurement, Office Closures Asset Rationalisation Logistics & Other Our confidence in delivering A$90M of synergies
Slide 12: Dyno – synergy update
Dyno – synergy update Next Steps – 2007 and beyond • Successful implementation of project plans to deliver A$90M in synergies • Integrate the management and financial systems of the two businesses in all countries • Expand IS manufacturing capacity at Gyttorp, Sweden following the decision to close
Slide 13: Dyno – acquisition costs
Dyno – acquisition costs Acquisition Costs Actual Prospectus Purchase Price 902 902 Completion Adjustment (25) Project Office Costs 32 15 Acquisition Costs 65 52 Total Acquisition Cost 974 969 Sale of Sasol (S Africa) (42) - Sale of Kimit (Scandinavia) (11) - Sale of TK (Malaysia) (6) - Net cost of
Slide 14: Dyno – integration costs
Dyno – integration costs 4% 5% 5% Redundancy 15% 42% Asset write offs (non cash) Synergy implementation IT costs Transitional costs Other 29% • Approximately 80% of implementation costs are expected to be incurred by year end 30 Sept 2007. Implementation costs on track at $150M 14
Slide 15: Yarwun update
Yarwun update • Yarwun expansion commissioned and AN production increasing • Imports of Ammonium Nitrate have been replaced and domestic customers are taking additional product from Yarwun • Production set to achieve forecast (572,000 ktpa) for full fiscal year 2007 • Estimated final cost of Yarwun
Slide 16: Australian IGAN production - state of play August 2006
Australian IGAN production - state of play August 2006 NW NE Yarwun 572 Kt Moura 180Kt SW SE CSBP Kooragang Is. 220Kt* 400Kt* Total Aust 2006 AN Demand: 1168Kt Imports 21Kt * Imminent additional capacity: • CSBP +235Kt (IGAN/UAN) AN Supply: 1377Kt Exports 230Kt • Kooragang Is. +30Kt Balance: +209Kt
Slide 17: Orica Asian IGAN position
Orica Asian IGAN position Total East Asia (not 2006 incl India, China) • AN Demand: 428Kt – Indonesia 301Kt – Other SE Asia 127Kt • AN Supply: 175Kt • Balance: -253Kt TNC 100 Kt Bacong 40 Kt Bontang proposal 250-300 Kt Orica IGAN SE Asian markets are structurally short of AN 17
Slide 18: North America – update
North America – update • Orica no. 2 player with market share ~35% • Market conditions are favourable • Outlook is for continued strong growth in the North American resource sector • Margin improvement is key – input price recovery – contracts have pass through clauses – leverage low cost sourcing s
Slide 19: Electronic blasting systems update
Electronic blasting systems update • No. 1 global player • Anticipate continued high growth • Strategic agreement with Nelson Brothers Mining Services in North America to accelerate EBS growth in largest market • Investing in further development of i-konTM and UNI-TronicTM to maintain market leaders
Slide 20: Summary
Summary • The acquired Dyno businesses are performing in line with expectations • A$90M synergy target on track by year 3, A$40M-$50M by end of FY2007 • Implementation costs on track with previous estimates • Additional Yarwun production coming on line successfully • Opportunities for additional Asi