Dyno Nobel Limited · ASX:DNL
Dyno Nobel — Incitec Pivot — FY2007 Earnings Presentation
23 slides from Dyno Nobel's earnings presentation, Nov 14, 2007
Slide 1: 2007 Annual Results
2007 Annual Results 2007 Annual Results Incitec Pivot Limited 14 November 2007 14 November 2007
Slide 2: 2007 Result
2007 Result NPAT (excl. individually material items) $202.5m ↑145% 145 EBIT $312.5m ↑148% Revenue $1,373m ↑24% EBIT Margin 22.8% ↑100% 100 EPS (cents) 402 ↑175% DPS (cents) 300 ↑191% ROSF 57% Total Shareholder Return 242%
Slide 3: IPL Transformed
IPL Transformed Revenue & EBIT Margin A$m 25% • Reduction in cost base 1400 20% • Acquisition of Southern Cross Fertilisers 1300 15% • Access to diverse markets - increase in 1200 10% traded volumes 1100 5% • Supply chain – step change in 1000 05 06 07 0% working capital Revenue (lhs) EBIT / Revenue
Slide 4: Strategy Scorecard 2007
Strategy Scorecard 2007 Lowest Cost Base Own the Product Tardis business Southern Cross efficiency program - successfully integrated benefits - $73.6m EBIT - $200.9m EBIT contribution benefit v promise of Gibson Island Reset ‘07 $25.5m(1) Lowest Gibson Island Sept outage 20.5% RONA in base Cost Aceh
Slide 5: Drivers of Financial Result
Drivers of Financial Result • Own.Breakout.Deliver culture program • Strong operational performance and full year contribution from Southern Cross • Benefits from Tardis efficiency program • Continued strength in global fertiliser prices, partially offset by strengthening AUD • Challenging seasonal
Slide 6: Challenging Seasonal Conditions
Challenging Seasonal Conditions Total IPL sales volumes 16% - full year SCF contribution kt Estimate of East Coast Fertiliser Market Volumes • Domestic volumes 338kt, or 15% 4,100 Volumes in all market segments except sugar declined due to 3,850 continuing drought conditions 3,600 • Trade volumes 73
Slide 7: James Fazzino, Finance Director & Chief Financial Officer
James Fazzino James Fazzino Finance Finance Director & Director & Chief Financial Officer Chief Financial Officer
Slide 8: Base Business EBIT Reconciliation
Base Business $M EBIT Reconciliation 150 12 2 .7 125 1.5 111.6 3 .0 7 .1 12 .4 100 3 3 .2 75 ( 4 6 .9 ) 1.3 5 4 .4 ( 10 .1) 50 ( 12 .6 ) 25 0 F Y06 Dro ught GI R e s e t F C IS M Ure a "Do Ta rdis Tra de As s e t DXL Othe r F Y07 EB IT pric e No thing" I&II s a le s divide nd EB IT (+$7m price EB IT
Slide 9: Southern Cross EBIT Reconciliation
Southern Cross $M EBIT Reconciliation 250 140.0 40.4 2.2 200.9 200 (35.6) 150 (4.3) (2.3) 100 60.5 50 $100.1m 0 FY06 DAP price FX Sulphur Drought Tardis Other FY07 EBIT Proforma 907kt @ CFR DAP US$117 @ 5.5cents @ 0.7575
Slide 10: Tardis Efficiency
Tardis Efficiency $M FY07 EBIT FY07 Exit Rate May 2007 May 2007 Tardis II* Target Delivered Target Delivered Southern Cross 29.6 40.4 35.5 44.6 Manufacturing 8.5 11.4 14.2 16.1 Efficiency Gibson Island Gas - 1.8 15.0 15.0 Supply Chain 6.9 12.0 9.0 18.1 TOTAL 45.0 65.6 73.7 93.8 Tardis I 8.0 8.0 38.0
Slide 11: Disciplined Capital Management
Disciplined Capital Management $m Trade Working Capital • Reduction in base business 250 25% TWC > $150M since 2005 200 20% • Underlying net debt reduced 150 15% by $120M v 2006 39 100 216 61 10% • Underlying net debt / EBITDA = 0.45 times 114 50 5% 60 • Significant balance sheet 0 0% capacity for g
Slide 12: Capital Spending 2007
Capital Spending 2007 Asset sales ($28.7m) Capital Gibson Island Reset 07 $42.1m Southern Cross gypsum cell $9.0m Gibson Island water recycling $4.3m Tardis and Orica exit $5.5m Sustenance $30.7m Total Capital $91.6m Net $62.9m
Slide 13: Delivering on Promises
Delivering on Promises What we promised What we delivered Tardis I & II efficiency savings 2007 EBIT benefits $73.6m $25m EBIT 2007(1) Gibson Island Reset ‘ 07 On time and on budget Southern Cross Fertiliser Record production – 978kt integration and reliability EBIT $200.9m Trading model 972kt trade
Slide 14: Julian Segal, Managing Director & Chief Executive Officer
Julian Segal Julian Segal Managing Managing Director & Director & Chief Executive Officer Chief Executive Officer
Slide 15: Outlook 2008
Outlook 2008 • Positive outlook for global fertiliser prices • Continued strength in Australian dollar • Difficult conditions in domestic distribution business
Slide 16: Continued Strength in Global Fertiliser Prices
Continued Strength in Global Fertiliser Prices US$ FY07 DAP FOB Tampa 550 • Current strength in global 450 fertiliser prices is demand driven 350 • Traditional drivers of Food, Feed 250 and Fibre remain strong 150 Jul-07 Mar-07 Apr-07 Nov-06 Jun-07 Aug-07 Jan-07 Sep-07 Dec-06 Feb-07 May-07 Oct-06 •
Slide 17: Domestic Conditions
Domestic Conditions • Cautious outlook • Even with an improvement in weather conditions, it will take time to rebuild volumes - Water allocations - Reduced livestock numbers - Farmer confidence - Farmer cash flow
Slide 18: Growth Opportunities
Growth Opportunities Lowest Cost Base Own the Product Tardis business efficiency Brownfield Opportunities program embedded in - Debottlenecking business model and - Larger projects culture. $28m benefit in Lowest Aceh 2008. Cost - MOU signed Base - feasibility complete 1HCY08 Supply Own the Dyno Nob
Slide 19: Summary
Summary • Strong 2007 result • Positive outlook for global fertiliser industry • Continued strength in Australian dollar • Challenging conditions for domestic distribution business • Good base for growth and opportunity to grow
Slide 20: Incitec Pivot
Incitec Pivot ae
Slide 21: Capital Spending 2008
Capital Spending 2008 $M Sustenance Capital 40 Consistent with replacement value of plants Shutdown SCF – Mount Isa 12 Catalyst screening every 18 months SCF – Phosphate Hill 2 $30M every 3 years. Next shut 2009 SCF – Gypsum Cell 7 $25M every 5 years. Next due 2012 Gibson Island - $30M over 4 years.
Slide 22: Sensitivities
Sensitivities • +/- US$10 DAP price = A$11.9m EBIT • +/- US$10 Urea price = A$5.5m EBIT • +/- AUD/USD 1c ~ A$8m Assumptions: • 970kt DAP sales at base price US$364/t @ 81.30 • 460kt urea/urea equivalent sales at base price US$264/t @ 81.30 • AUD/USD base price 81.3 cents
Slide 23: Sales Volumes
Sales Volumes Sugar 4% - higher 2006 cotton prices Summer crop 43% - drought affected Pasture 12% - significant de-stocking Winter crop 20% - poor follow-up rainfall