Dyno Nobel Limited · ASX:DNL
Dyno Nobel — Incitec Pivot — Non-Deal Roadshow (June 2008)
47 slides from Dyno Nobel's roadshow presentation, June 2008
Slide 1: Incitec Pivot Limited US Roadshow Investor Presentation
Incitec Pivot Limited US Roadshow Investor Presentation June 2008
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Incitec Pivot Limited for professional and sophisticated investors. The information contained in this presentation is for information purposes only and does not constitute an offer to issue, or arrange to issue, securities or other financial products
Slide 3: Supercycle
Supercycle Copper intensity of use = consumption per unit of GDP 1.25 1.00 0.75 Index 0.50 0.25 0.00 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 USA Japan China A 30-year investment thematic Source: Citigroup; USGS; US Dept of Labour;
Slide 4: Strategy to leverage the supercycle
Strategy to leverage the supercycle • The super cycle is driving demand in China both hard and soft commodities 450 400 ¾ Chinese/Indian economies 350 Indexed consumption by volume (%) driving the mining boom 300 250 ¾ Growth in China and India per 200 150 capita GDP driving a step 100 change in foo
Slide 5: IPL Fertiliser Business
IPL Fertiliser Business 5
Slide 6: Leveraging low cost manufacturing assets
Leveraging low cost manufacturing assets 1. Intensive • Major Manufacturing and Distribution Sites horticulture & sugar • Distribution Sites Southern Cross Fertilisers: • • Phosphate Hill: 970ktpa MAP & DAP Mt Isa: 1,000ktpa Sulphuric Acid Townsville: MAP & DAP distribution & export facility Gibson
Slide 7: A balanced exposure to Australian agriculture
A balanced exposure to Australian agriculture TAS Export Manufactured products(1) tonnes SA QLD Ammonium phosphate 970,000 Urea 280,000 Ammonia (anhydrous) 100,000 VIC NSW Ammonium sulphate 270,000 Single superphosphate 780,000 Total manufactured 2,400,000 Imported products Summer Crops Extensive Pa
Slide 8: World scale ammonium phosphate production at Phosphate Hill
World scale ammonium phosphate production at Phosphate Hill • World scale asset • Bottom of the global cost curve • Low cost rock deposit • Low cost sulphuric acid • Low cost ammonia (underpinned by long term gas contract) • Nameplate capacity 970,000 tonnes per annum 8
Slide 9: IPL Explosives Business - Dyno Nobel
IPL Explosives Business - Dyno Nobel 9
Slide 10: Dyno Nobel – Overview
Dyno Nobel – Overview • A global leader in the supply of commercial explosives - # 1 in North America (worlds largest market) and # 2 in Australia (3rd largest market) • Development, production and distribution of full range of explosives products and services through 36 manufacturing facilities and
Slide 11: IPL and Dyno Nobel are a natural combination
IPL and Dyno Nobel are a natural combination • The combination is about FIT and FLEXIBILITY • Fertilisers and explosives FIT together because of the commonality in underlying chemical processes and inputs 9 Nitrogen-based chemical manufacturing is at the core of both companies 9 Manufacturing drives
Slide 12: Dyno Nobel is number 1 in the US market
Dyno Nobel is number 1 in the US market Market Leader Strategically Located Facilities ¾ North America is the largest explosives market in the world ¾ No.1 USA & Canada ¾ North American revenue: • By Geography: 16% Canada, Powder 84% USA/Mexico River Basin • By Product: 60% AN based explosives, 23%
Slide 13: Dyno Nobel is number 2 in the Australian market
Dyno Nobel is number 2 in the Australian market Second Strong Player Strategically Located Facilities ¾ Third largest explosives market in the world Bowen Basin (Coal) Pilbara (Iron ¾ Serviced by two key players ore) Surat Basin (Coal) ¾ No.2 market position ¾ Customers supportive of a second strong
Slide 14: Dyno Nobel is number 1 in the Canadian Market
Dyno Nobel is number 1 in the Canadian Market Market Leader Strategically Located Facilities No.1 in Canada following recent acquisitions of: ¾ Remaining 20% of Dyno Nobel Canada held by minority partner ¾ Nitrogen assets from Nitrochem Corporation (Maitland) ¾ ETI Holdings Corporation ETI Acquisiti
Slide 15: Dyno Nobel North American manufacturing
Dyno Nobel North American manufacturing 15
Slide 16: Dyno Nobel North American manufacturing
Dyno Nobel North American manufacturing 16
Slide 17: Outlook - Global Fertiliser Demand “the 4 F’s”
Outlook - Global Fertiliser Demand “ the 4 F’s ” 17
Slide 18: Demand is growing
World Nutrient Demand Through 2010 Million Tonnes 180 160 140 120 100 80 60 40 20 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 ™@ Developed Nations ® DevelopingNations mTransition Economies Source: IFA Incitec Pivot 18
Slide 19: Food
Food • Population growth and economic prosperity in developing countries is increasing demand for food • Global net population growth ~200,000 people per day • Step change in quantity and quality of food consumption as GDP/capita increases to between US$3k - US$5k Strong population growth in ….and i
Slide 20: Feed
Feed 3500 600 total Production of Grain (106t) total Production of meat (105t) 3000 total Production of milk (104t) 500 total Production of egg (104t) 2500 400 2000 300 1500 200 1000 100 500 0 0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 Compared to 1980, grain production incre
Slide 21: Feed
Feed Demand for grains used for animal production may not be met in the future – different scenarios 12 10.6 U.S. Scenarios 10 Develop 9.2 as current speed 8 Limitation by (108 LU) 7.6 resources 6 6.6 Chinese 4.1 nutrition 4 standard 1LU=1000kg live 2003 yr 2 animal weight 0 1950 1960 1970 1980 1990
Slide 22: Feed
% Of animal protein protein of total 80 70 2°. Australia Argentina o Spain 5 Malaysia @_—_ Switzerland 60 Russian Fed Jamaica, = Venezuela Canada Colombi? Philippines 2] Thailand 0 <— Brazil Pojand \ ol Chile 2 2 La ° oN Mexico “~~ Korea Rep China 42 Sudan a Pakistan | 30 India| on Tunisia eo Algeri
Slide 23: Feed
Feed Meat Consumption Per Capita North America Developed World • Meat consumption in developing Latin America world lags developed world World Developing World average Asia Africa • Rising per capita income drives 0 10 20 30 40 50 60 70 80 90 100 110 120 130 kg / person / year demand for complex pro
Slide 24: Feed
Feed Cereal stocks are at record lows, equivalent to just 25.0 10 weeks’ production 20.0 15.0 13 weeks 10 weeks 10.0 5.0 Surplus Squeeze 0.0 1990 '91 '92 '93 '94 '95 '96 '97 '98 '99 2000 '01 '02 '03 '04 '05 '06 '07 Source: FAO, British Sulphur Consultants 24
Slide 25: Fuel
Fuel Bil Bu U.S. Corn Used for Fuel Ethanol Production 4.0 40% • Recent dislocation in 3.5 35% nutrient demand has been Source: USDA and Mosaic 3.0 30% driven by biofuel 2.5 25% • Government mandates 2.0 20% underpinning demand for 1.5 15% renewable fuels 1.0 10% • Corn, sugar, palm oil are 0.5 5% n
Slide 26: Fibre
Fibre Cotton Consumption (million tonnes) • Demand for plant fibres will continue to be strong • Cotton production is forecast to stay at the currently elevated levels Source: UNCTAD, based on: "Cotton: World Statistics - International Cotton Advisory Committee (ICAC)" 26
Slide 27: Constraints – arable land
Constraints – arable land Population Growth & Arable Land Per Capita 9 0.6 8 • Arable land per capita is Arable land ha/person 0.5 7 World population (billions) 6 0.4 declining as population 5 0.3 increases 4 3 0.2 2 • Crop yields must increase to 1 0.1 meet increased demand for 0 0.0 food 1950 1960
Slide 28: Australian Fertiliser Demand vs Rest of World
Australian Fertiliser Demand vs Rest of World Maximum Potential Farm Land Fertiliser Consumption per Harvest Area (millions of hectares) (kilograms of fertiliser per hectare) Brazil 58 160 UK 194 China 189 US 188 81 France 182 Russia 132 88 Chile 161 EU 116 60 US 157 India 169 Brazil 117 China 96 42
Slide 29: Improvement in land use efficiency
Improvement in land use efficiency Population Supporting capacities in Developing Countries Current Inputs Low Inputs High Inputs 2000 Potential Potential Total Land Area Population Population Population Location Million Acres Millions (Millions) (Millions) Africa 7,109 780 2,488 12,867 Southwest As
Slide 30: Outlook – Ammonium Phosphate Supply
Outlook – Ammonium Phosphate Supply 30
Slide 31: Top five rock exporters = 76% of global trade
Top five rock exporters = 76% of global trade There is a high concentration in the phosphate rock / phosphoric acid/ammonium phosphates, particularly in the export markets 80% share of global rock exports 70% 60% 50% 40% 30% 20% 10% 0% OCP, JPMC, Gecopham, Ferphos, Phosagro, Morocco Jordan Syria Alg
Slide 32: Global ammonium phosphate industry
Global ammonium phosphate industry Industry Production Major producers & exporters 28% Traded Mosaic (USA)(1) 9.5mt Volume OCP (Morocco) 3.8mt Phos Agro (Russia)(2) 3.0mt CF Industries (USA) 2.2mt GCT (Jordan) 2.0mt 72% Local China(3) 15.4mt Conversion Industry volume: Lead time for new capacity: Ap
Slide 33: Phosphate rock prices should remain strong
Phosphate rock prices should remain strong There has been a fundamental shift in the value of phosphate rock. US$/t • Limited planned new 300 capacity additions to Phosphate Rock capacity 250 • 4-year lead-time for new 200 capacity in an increasing capital cost environment 150 • Rock suppliers seeki
Slide 34: Step change in outlook for other input costs
Step change in outlook for other input costs Natural Gas Prices: Henry Hub US$ MM Btu 20 Daily Cash Price Index Increasing Cost of Natural Gas 18 16 Source: Enerdata • Natural gas is a key determinant 14 of cost, price and margin 12 10 • Step change in global energy 8 6 costs. Stranded gas not 4 nec
Slide 35: Escalating cost of new capacity
Escalating cost of new capacity Index % change Chemical Engineering Plant Cost Index (year on year) 550 (CEPCI) 12% 525 500 10% 500 468 8% 444 450 6% 402 4% 396 400 2% 350 0% 2002 2003 2004 2005 2006 2007 CEPCI Index % Change - year on year change • Higher construction costs coincide with hard commo
Slide 36: Non-integrated Ammonium Phosphate producer costs to set floor price
Non-integrated Ammonium Phosphate producer costs to set floor price DAP production - input & conversion costs $US/t 1,200 $1,126 Conversion 1,000 $132 Ammonia Sulphur 800 $264 Phosphate Rock DAP Composition 600 $520 + 1.7t Phosphate $680 Rock (Morocco) 400 + 0.44t Sulphur $282 $310 + 0.22t Ammonia 2
Slide 37: Global Ammonium Phosphate Trends
Global Ammonium Phosphate Trends $US FOB/t 1,300 1,200 Source: Fertecon – DAP Tampa & IPL Step change in pricing 1,100 IPL 2008 Full Year 1,000 Forecast Ave DAP • Demand (4 F’s) pulling 900 800 $US910/t fob prices 700 600 2007 Ave DAP $US362/t fob • Global cost curve has 500 400 2006 Ave DAP $US263/
Slide 38: Incitec Pivot - Growth platform
Incitec Pivot - Growth platform 38
Slide 39: IPL is executing on its growth strategy
IPL is executing on its growth strategy Merger of Tardis Southern Southern Incitec Dyno 1&2 Cross & GI Cross Int & Nobel renewal Pivot Lowest Lowest Lowest Lowest Cost Cost Cost Cost Base Base Base Base Market Own the Own the Own the Own the Supply Supply Leader Supply Product/ Supply Product/ Chain
Slide 40: Global platform for growth
Global platform for growth Existing Operations Canada DXL Presence #1 Re-entry market opportunities United States DXL Presence #1 China / South East Asia DXL Presence Fabchem JV South Africa DXL Presence Sasol DN JV Australia / NZ IPL Presence #1 DXL Presence #2 A leading nitrogen based production a
Slide 41: IPL Strategy for Growth
IPL Strategy for Growth Lowest Cost Base Own the Product Position the business to generate Generate exposure to most profitable adequate returns in all conditions part of the industry value chain – manufacturing – while maintaining Achieved: financial discipline 9 Savings and business Lowest Achieve
Slide 42: Q&A Appendix
42 Incitec Pivot a
Slide 43: 1H Results Summary Key Financials
1H Results Summary Key Financials 6 Months Ended 31 March A$M 2008 2007 Change Sales revenue 749.3 543.6 38% EBIT(1) 250.0 83.9 198% EBIT Margin(1) 33.4% 15.4% NPAT(1) 171.1 49.6 245% NPAT incl. individually material items 169.8 57.2 197% Delivering on our promises (1) excluding individually materia
Slide 44: 1H Results Summary Shareholder returns
1H Results Summary Shareholder returns 6 Months Ended 31 March A$M 2008 2007 Change Shareholder returns: EPS(1) (cps) 339 98 245% Dividend (cps) 204 69 196% Share price (31 March) 141.15 49.50 185% Capital Management: Underlying(2) Net Debt 272 400 32% Underlying(2) Net Debt/EBITDA 0.5x 1.9x 73% Und
Slide 45: 1H Results Summary Balance Sheet
1H Results Summary Balance Sheet 31-Mar 31-Mar 30-Sep 2008 2007 2007 A$M Trade working capital 255 251 121 Net property plant and equipment 508 505 502 Intangibles 190 195 194 Investment in Dyno Nobel 276 0 291 Environmental & restructuring (62) (82) (74) Tax (liabilities)/assets (22) 12 (7) Net oth
Slide 46: Earnings Sensitivities
Earnings Sensitivities • +/- US$10 DAP price = A$11.9m EBIT • +/- US$10 Urea price = A$5.5m EBIT • +/- AUD/USD 1c ~ A$8m Assumptions: • Based on 2007 reported earnings • 970kt DAP sales at base price US$364/t @ 81.3 cents • 460kt urea/urea equivalent sales at base price US$264/t @ 81.3 cents • AUD/U
Slide 47: Nitrogen chemistry
Nitrogen chemistry Additive Finished Product End Market Fertiliser / Ammonia Industrial + Carbon Urea Fertiliser Dioxide Natural / Synthetic Ammonia Ammonium Fertiliser / + Nitric Acid Gas Nitrate (AN) Explosives Urea / Ammonium Nitrate Fertiliser (UAN) + Phosphoric Ammonium Fertiliser Acid Phosphat