Orica Limited · ASX:ORI
Orica — FY2013 Earnings Presentation
53 slides from Orica's earnings presentation, Nov 11, 2013
Slide 1: 2013 Full Year Results
For personal use only 2013 Full Year Results 11 November 2013 Ian Smith, Managing Director and CEO Craig Elkington, Chief Financial Officer © Orica Limited Group
Slide 2: Disclaimer
Disclaimer For personal use only Forward looking statements This presentation has been prepared by Orica Limited. The information contained in this presentation is for informational purposes only. The information contained in this presentation is not investment or financial product advice and is not
Slide 3: Agenda
For personal use only Sustainability 4-6 Financial Performance 7 - 20 Projects Update 21 - 27 Business Update 28 - 33 3
Slide 4: Safety Performance
Safety Performance For personal use only 0.9 5 0.8 4.5 4 0.7 3.5 Injury Frequency Rate 0.6 Severity Index 3 0.5 2.5 0.4 2 0.3 1.5 0.2 1 0.1 0.5 0 0 2010 2011 2012 2013 LWCR Severity Index AWRCR 2013 AWRCR including Ground Support 1. AWRCR: All Worker Recordable Case Rate, total number of recordable
Slide 5: Greenhouse Gas
Greenhouse Gas For personal use only • The net cost of the Australian carbon tax to Orica is immaterial: − the cost of direct emissions is mostly offset through free permits allowed for EITE (Emissions Intensive Trade Exposed) activities − installment of abatement at most nitric acid plants in Austr
Slide 6: Licence To Operate
Licence To Operate For personal use only Kooragang Island and Yarwun Significant improvement in SHEC performance at major Sustaining and Maintenance Capital1 manufacturing plants delivered through: $m 160 140 120 • Plant improvement initiatives: 100 − ammonia plant upgrade and risk reduction 80 60 −
Slide 7: Agenda
For personal use only Sustainability 4-6 Financial Performance 7 - 20 Projects Update 21 - 27 Business Update 28 - 33 7
Slide 8: Group Financial Performance
Group Financial Performance For personal use only Full year ended 30 September (A$M) 2013 2012 % EBITDA1 1,269.2 1,274.0 0 EBIT2 984.8 1,022.6 (4) Statutory profit after tax3 601.6 402.8 49 Underlying profit after tax4 601.6 650.2 (7) Net operating cash flow 1,058.7 544.1 95 1. Earnings be
Slide 9: Shareholder Returns
Shareholder Returns For personal use only Full year ended 30 September 2013 2012 % Earnings per share (cents) - After individually material items 165.4 109.2 51 - Before individually material items 165.4 177.9 (7) Dividends per share (cents) 94.0 92.0 2 Return on shareholders’ funds1 (%) - A
Slide 10: Group EBIT
Group EBIT For personal use only A$M 1,200 1,150 36 (33) 90 (21) (29) 1,100 (33) (23) 1,050 1,023 (35) 10 985 1,000 950 900 850 800 2012 EBIT KI Shutdown Volume Price/Mix - Price/Mix - Ground Depreciation / Land Sales FX Other Costs 2013 EBIT Explosives Other Product Support Amortisation Groups Opti
Slide 11: Explosives Volumes
Explosives Volumes For personal use only 2013 - Movement versus 2012 10% 5% 0% -5% -10% 1 Australia / Pacific North America Latin America EMEA Asia Total Market share growth in the Pilbara region Lower volumes in North East Australia and South East Australia Weak demand from eastern USA coal
Slide 12: Explosives Pricing and Product Mix
Explosives Pricing and Product Mix For personal use only Percentage Shift to Emulsion Pricing 10% Modest price improvements for bulk explosives in North America 8% Relatively stable pricing in Australia, Latin 6% America and Indonesia 4% Pricing pressure in EMEA 2% Softer pricing in India an
Slide 13: Explosives Contribution / Tonne
Explosives Contribution / Tonne For personal use only Change in Explosives Contribution per Tonne1 30 20 2013 versus 2012 % movement 10 2 0 Australia / Pacific North America Latin America EMEA Asia Total -10 -20 -30 -40 -50 H1 2013 H2 2013 FY 2013 Pricing and product mix improvements reflected in co
Slide 14: Other Product Groups
Other Product Groups For personal use only Volume Demand for sodium cyanide volumes up 2% Stronger chlorine volumes. Caustic soda volumes steady. Weak demand for ground support products in all regions with global volumes of steel down 6% and resins and powders down 25% Price and Mix Stable p
Slide 15: Investing Activities
Investing Activities For personal use only Capital Expenditure1 / Acquisitions Actual 2013 Budget 2014 Sustaining 243 211 Customer Facing Contract Capital2 116 121 Growth3 217 95 Burrup4, 5 200 162 Total 776 589 Lower capital expenditure forecast in FY14 1. Excludes capitalised interest. 2. Capital
Slide 16: Capital Management
Capital Management For personal use only Key Measures 2013 2012 Net debt (A$M) 2,331.3 2,299.2 Net interest expense (A$M) 150.2 128.2 Operating cash (A$M) 1,058.7 544.1 Trade working capital (A$M) 699.1 722.2 Gearing (%) 36.9 41.5 Interest cover (times) 1 6.6 8.0 Cash conversion (%) 80.5 72.0 Rollin
Slide 17: Drawn Debt Maturity Profile
Drawn Debt Maturity Profile For personal use only A$M A$M 5,000 600 500 4,000 2,115 54 2,115 400 3,000 1 3 300 2 2,000 463 377 119 292 200 2,561 345 275 2,561 1 1,000 100 108 133 1 91 108 13 13 56 12 70 13 12 0 0 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Sep-23 Sep-25 Sep-26 Sep
Slide 18: 2014 Hedging
2014 Hedging For personal use only • Orica has exposures to a basket of currencies given its geographical spread • Transactional and translational (EBIT) exposures are typically hedged using options to reduce volatility in AUD earnings • The largest exposure is against the USD which represents appro
Slide 19: Environmental Provisions
Environmental Provisions For personal use only Environmental Spend (A$M) Actual Forecast 2013 2014 2015 2016 2017 Major environmental spend: Botany groundwater remediation1 12 13 13 13 13 HCB remediation2 7 4 2 2 2 Botany mercury remediation 4 11 7 - - Other 13 35 21 3 3 Total environmental spend 36
Slide 20: CFO Priorities
CFO Priorities For personal use only • Finance fundamentals to drive performance • Rigorous cash flow management • Returns from capital employed • Debt & Equity stakeholder relationships 20
Slide 21: Agenda
For personal use only Sustainability 4-6 Financial Performance 7 - 20 Projects Update 21 - 27 Business Update 28 - 33 21
Slide 22: Mineral Carbonation
Mineral Carbonation For personal use only • Carbon capture technology that permanently stores CO2 by reacting it with mineral silicates. • Orica is a partner in Mineral Carbonation International (MCi) with The University of Newcastle and GreenMag which aims to further develop carbon capture technolo
Slide 23: Bontang Ammonium Nitrate Plant
Bontang Ammonium Nitrate Plant For personal use only kt AN Production 300 • AN plant with capacity of ~ 300 ktpa located at 250 Bontang, Indonesia. 200 Annualised 150 • The plant is currently operating at name plate 100 capacity on an annualised basis and product 50 0 quality is within specification
Slide 24: HONCE Initiating Systems
HONCE Initiating Systems For personal use only • Plant capacity 40 million non- electric detonators • Commissioning will occur progressively over the next 12 months • Licence approval process underway 24
Slide 25: Burrup Ammonium Nitrate Project
Burrup Ammonium Nitrate Project For personal use only • 330ktpa capacity AN plant on the Burrup Peninsula, Western Australia, in joint venture with Yara and Apache (Orica share: 45%). • Unique project and capital structure − $110M entry fee − 45% of project capital − 100% marketing rights for all AN
Slide 26: Kooragang Island Capacity
Kooragang Island Capacity For personal use only Rationale Concept • Ammonium Nitrate (AN) demand in South East • Increase AN production to 500ktpa by investing Australia exceeds production from Kooragang in nitric acid import storage. Island. • Project cost approximately $40 million • During 2015 th
Slide 27: Gas Agreement with ESSO / BHPB
Gas Agreement with ESSO / BHPB For personal use only • Entered 3 year deal with Esso Australia and BHP Billiton to supply KI’s total gas requirement from 1 January 2017 to 31 December 2019 – 14PJ per annum (total supply of 42PJ) – pathway to extend for a further 3 years • Gas sourced from Gippsland
Slide 28: Agenda
For personal use only Sustainability 4-6 Financial Performance 7 - 20 Projects Update 21 - 27 Business Update 28 - 33 28
Slide 29: Delivery of Strategy
Delivery of Strategy For personal use only Leverage • Removal of functional duplication New • Cost control and efficiencies Operating • Supply chain excellence Model • Manufacturing excellence Disciplined • Capital light approach to manufacturing Capital • Disciplined approach to project management
Slide 30: Integration of Ground Support
Integration of Ground Support For personal use only 2013 2014 • Global volumes – steel down 6% and resins and • Ongoing beneficial effects from optimisation & powders down 25% integration are in line with estimates flagged at • Integration of ground support business into the first half result Mining
Slide 31: Contracts for Explosives
Contracts for Explosives For personal use only Contract Renewal Profile for Explosives (October 2012 until the end of September 2013) % of Contract Revenue Retained at Re-Tender > 90 % % of Contract Revenue Lost at Re-Tender < 10 % For every $1 of contract revenue lost at re-tender we won in excess
Slide 32: Contracts for Explosives: Conclusions
Contracts for Explosives For personal use only Conclusions 1. Volumes : 2013 volumes have been slightly down across most markets offset partly by the expansion of our contract base. 2. Price : current market conditions have limited our ability to lift the pricing of Ammonium Nitrate outside of North
Slide 33: Financial Year 2014 Outlook
Financial Year 2014 Outlook For personal use only Group net profit after tax before individually material items in FY 2014 is expected to exceed FY 2013, however volatile market conditions add a greater degree of uncertainty. 33
Slide 34: Supplementary Information
For personal use only Supplementary Information 34
Slide 35: 2013 Explosive Volumes
2013 Explosive Volumes For personal use only 2013 Volumes Variance - 2013 vs 2012 Volumes Emulsion Emulsion ‘000 Tonnes AN1 Products2 Total AN1 Products2 Total Australia/Pacific 297 910 1,207 (14%) 14% 5% North America 818 514 1,332 (9%) (1%) (6%) Latin America 252 416 668 (10%) (7%) (8%) EMEA 147 2
Slide 36: EBIT Contribution by Business
EBIT Contribution by Business1 For personal use only FY September 2012 FY September 2013 Chemicals Chemicals Group 9% Group 8% Mining Mining Services 91% Services 92% 1. Excludes corporate centre and other support costs 36
Slide 37: EBIT Contribution by Geography
EBIT Contribution by Geography For personal use only FY September 2012 FY September 2013 Other 1% Europe 6% Other 1% Europe 13% Latin America 10% Latin America 9% North America 9% North America Australia/ 13% Pacific 58% Australia/ Asia 12% Pacific 62% Asia 6% 37
Slide 38: Gross Sales by Geography
Gross Sales by Geography For personal use only FY September 2012 FY September 2013 Europe 12% Europe 12% Australia/ Pacific 38% Australia/ Latin America Pacific 37% 16% Latin America 17% North America 17% North America 17% Asia 17% Asia 17% 38
Slide 39: Net Profit After Tax
Net Profit After Tax1, 2 For personal use only A$M 700 +4.6% +12.9% -5.0% +1.2% DLX -7.5% 600 +15.0% +31.0% 500 400 +11.8% +20.5% +4.4% 300 200 100 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Compound average growth rate since 2003 is 8.3% 1. Profit after income tax expense before individ
Slide 40: EBIT by Business
EBIT by Business For personal use only Mining Services Chemicals 1200 120 10% 20% 1000 100 8% EBIT Margin EBIT Margin 800 16% 80 EBIT A$M EBIT A$M 6% 600 12% 60 4% 400 8% 40 4% 2% 200 20 0 0% 0 0% 2010 2011 2012 2013 2010 2011 2012 2013 1st Half EBIT 2nd Half EBIT EBIT Margin 1st Half EBIT 2nd Half
Slide 41: Mining Services
Mining Services For personal use only Full year ended 30 September (A$M) 2013 2012 % Sales 5,770.2 5,629.8 2 EBITDA 1,239.7 1,225.2 1 EBITDA margin (%) 21.5% 21.8% (1) EBIT 992.7 1,009.5 (2) EBIT margin (%) 17.2% 17.9% (4) 41
Slide 42: Mining Services Australia Pacific
Mining Services Australia Pacific For personal use only Regional Revenue Contribution FY2013* Commodity Revenue Exposure FY2013* New Zealand 2% Q&C 4% 5% 1% Mining Chemicals 6% 6% Ground Support 8% Thermal Coal Pilbara 9% Coking Coal 10% 35% West Gold 17% Other Iron Ore 11% South East 27% Copper Q&C
Slide 43: Mining Services North America
Mining Services North America For personal use only Regional Revenue Contribution FY2013* Commodity Revenue Exposure FY2013* 7% 14% 2% Mexico 9% Thermal Coal 19% Coking Coal Ground Support 36% Gold Iron Ore Canada 27% 18% Q&C Copper Nickel US 40% 3% Other 6% 19% Orica FY2013 Revenue Actuals *Bar cha
Slide 44: Mining Services Latin America
Mining Services Latin America For personal use only Regional Revenue Contribution FY2013* Commodity Revenue Exposure FY2013* 2% Ground Support 12% Mining Chemicals 9% 3% Central America Venezuela 4% & Caribbean Thermal Coal Argentina 8% 38% Gold Colombia 11% 21% Iron Ore Brazil 13% Other Peru 14% Q&
Slide 45: Mining Services EMEA
Mining Services EMEA For personal use only Regional Revenue Contribution FY2013* Commodity Revenue Exposure FY2013* Mining Chemicals 8% 6% 14% 12% Thermal Coal Ground Support 28% Gold CIS 7% Iron Ore 20% Turkey 7% Other Europe 13% Q&C Africa 12% 30% Distributors 2% Copper Nordics 25% 16% Orica FY201
Slide 46: Mining Services Asia
Mining Services Asia1 For personal use only Regional Revenue Contribution FY2013* Commodity Revenue Exposure FY2013* 5% 2% Ground Support Mining Chemicals 3% Thermal Coal North Asia 6% 23% 16% Coking Coal India Copper 48% 1% Gold Indonesia 50% Iron Ore 16% Q&C Other 9% 1% East Asia 20% Orica FY2013
Slide 47: Chemicals
Chemicals For personal use only Full year ended 30 September (A$M) 2013 2012 % Sales 1,198.8 1,199.4 (0) EBITDA 122.8 129.2 (5) EBITDA margin (%) 10.2% 10.8% (6) EBIT 92.0 100.4 (8) EBIT margin (%) 7.7% 8.4% (8) 47
Slide 48: Cash Conversion
Cash Conversion For personal use only Full year ended 30 September (A$M) 2013 2012 EBITDA 1,269.2 1,274.0 TWC movement 21.4 (121.9) Sustaining Capital1 (268.7) (234.2) Cash Conversion 1,021.9 917.9 Cash Conversion %2 80.5% 72.0% 1. Includes a component of customer facing contract capital to the exte
Slide 49: Net Interest Expense
Net Interest Expense For personal use only Full year ended 30 September (A$M) 2013 2012 $ Net interest expense 150.2 128.2 22.0 Comprising: Interest on net debt 154.1 159.8 (5.7) Add: Unwinding of discount on provisions 7.7 5.9 1.8 Add: Major external finance leases 0.3 0.6 (0.3) Less: Cap
Slide 50: Interest Cover
Interest Cover For personal use only Full year ended 30 September (A$M) 2013 2012 $ Financial income 34.2 32.9 1.3 Financial expense1 (184.4) (161.1) (23.3) Net financing costs (150.2) (128.2) (22.0) EBIT 984.8 1,022.6 (37.8) Interest cover (times) 6.6 8.0 1. Financial expense in 2013 in
Slide 51: Debt Profile
Debt Profile For personal use only Drawn Debt Debt Maturity Profile (as at 30 September 2013) Bank Loans, A$M Drawn Undrawn Total Other 1, $62M $159M Export Finance, < 1 year 444 681 1,125 $89M 1 – 2 years 543 1,109 1,652 Commercial 2 – 5 years 481 325 806 Paper, $377M > 5 years 1,089 - 1,089 USPP,
Slide 52: Non IFRS Reconciliation
Non IFRS Reconciliation For personal use only Full year ended 30 September (A$M) 2013 2012 % Statutory profit after tax 601.6 402.8 49 Add back: Individually material items after tax - 247.4 Underlying profit after tax 601.6 650.2 (7) Adjust for the following: Net financing costs 150.2 128.2 1
Slide 53: Disclosures and Definitions
Disclosures and Definitions For personal use only Term Definition Net profit for the period attributable to shareholders of Orica Limited as disclosed in note 2 to the Orica Annual Report Statutory profit after tax (Segment report). Profit after income tax expense before individually material items