Orica Limited · ASX:ORI

Orica — US PP Conference 2008

41 slides from Orica's conference presentation, January 2008

  1. Slide 1: US PP Conference Orica Presentation

    US PP Conference Orica Presentation January 2008

  2. Slide 2: Group performance

    Group performance Year ended 30 September (A$M) 2007 2006 % Sales 5,527.2 5,359.2 3.1 “ Gross margin 2,474.0 2,125.2 16.4 “ EBITDA 995.9 814.6 22.3 “ EBIT 812.7 657.7 23.6 “ Net profit after tax pre significant items 497.8 380.3 30.9 “ Net profit after tax after significant items 487.7 539.1 9.5 ”

  3. Slide 3: Divisional EBIT

    Divisional EBIT Year ended 30 September (A$M) 2007 2006 % Mining Services 575.1 412.0 39.6 “ Minova 1 61.6 - - Consumer Products 2 101.6 97.3 4.4 “ Chemical Services 68.7 67.1 2.4 “ Chemnet 58.7 57.7 1.7 “ Fertilisers - 74.3 100.0 ” Total Businesses 865.7 708.4 22.2 “ Corporate Centre (39.3) (36.3)

  4. Slide 4: EBIT growth

    EBIT growth A$M 900 62 850 78 813 800 (80) 95 750 700 658 650 600 FY06 EBIT Ex-Dyno Underlying Minova Divested FY07 EBIT Business Businesses Growth US PP Conference - Orica Full Year Results 2007 4

  5. Slide 5: Orica's approach – value drivers

    Orica’s approach – value drivers US PP Conference - Orica Full Year Results 2007 5

  6. Slide 6: Gross margin growth

    Gross margin growth A$M 2,600 16.4% 2,400 2,200 7.6% 4.3% 2,000 13.9% 1,800 8.2% 0.1% 6.1% 1,600 1,400 1,200 1,000 2001 2002 2003 2004 2005 2006 2007 Cumulative average growth rate since 2001 is 8.3% US PP Conference - Orica Full Year Results 2007 6

  7. Slide 7: Productivity

    Productivity 100% 95% 91.8% 90% 85% 78.9% 80% 75.1% 74.0% 73.2% 72.8% 75% 69.8% 70% 65% 60% 55% 50% 2001 2002 2003 2004 2005 2006 2007 Productivity is measured as fixed costs (incl. depreciation and amortisation) as a percentage of gross margin. US PP Conference - Orica Full Year Results 2007 7

  8. Slide 8: Net profit after tax

    Net profit after tax A$M +30.9% 500 +11.9% 400 +4.4% +20.5% +13.0% 300 +283.8% 200 100 0 2001 2002 2003 2004 2005 2006 2007 Cumulative average growth rate since 2001 is 41.4% US PP Conference - Orica Full Year Results 2007 8

  9. Slide 9: Divisional performance

    Divisional performance

  10. Slide 10: Orica Mining Services

    Orica Mining Services Year ended 30 September (A$M) 2007 2006 % Sales 3,111.2 2,620.9 18.7 “ EBITDA 697.9 506.0 37.9 “ EBITDA margin (%) 22.4 19.3 16.1 “ EBIT 575.1 412.0 39.6 “ EBIT margin (%) 18.5 15.7 17.8 “ Return on net assets (%) 25.6 25.1 Average operating net assets 2,245.6 1,644.2 Record r

  11. Slide 11: Orica Mining Services EBIT margin

    Orica Mining Services Sales $3,111M; EBIT $575M; Average Net Assets $2,246M; RONA 26% 700 20% 18% 600 16% EBIT MARGIN 500 14% EBIT A$M 400 12% 10% 300 8% 200 6% 4% 100 2% 0 0% 2004 2005 2006 2007 1st Half EBIT 2nd Half EBIT EBIT MARGIN  Record result  EBS expansion project progressing well  EBIT

  12. Slide 12: Orica Mining Services by geography

    Orica Mining Services by geography Australia/Asia North America 350 24% 90 12% 22% 80 300 20% 10% 18% 70 EBIT MARGIN EBIT MARGIN 250 60 8% 16% EBIT A$M EBIT A$M 200 14% 50 12% 6% 150 10% 40 8% 30 4% 100 6% 20 50 4% 2% 2% 10 0 0% 0 0% 2004 2005 2006 2007 2004 2005 2006 2007 1st Half EBIT 2nd Half EBI

  13. Slide 13: Acquired ex Dyno business performance

    Acquired ex Dyno business performance EBIT (A$M) 2007 Underlying trading performance of Ex Dyno Businesses 59.7 Synergies delivered 70.4 Amortisation of intangibles (8.9) 2007 EBIT 121.2 Synergy Benefit (A$M) 2007 2008 2009 Current View 70 90 90 March 2007 50-60 80-90 90 US PP Conference - Orica Ful

  14. Slide 14: Acquired ex Dyno business - integration costs

    Acquired ex Dyno business - integration costs 2006 2007 Cumulative Integration cost category (A$M) Actual Actual Actual Asset write-offs – non cash 45 7 52 Redundancies 41 5 46 Transitional salaries/other 7 6 13 Synergy implementation costs 4 10 14 Total Integration costs 97 28 125 Project office co

  15. Slide 15: Minova

    Minova Nine months ended 30 September (A$M) 2007 Sales 332.1 EBITDA 75.1 EBITDA margin (%) 22.6 EBIT 61.6 EBIT margin (%) 18.5 Underlying EBIT 1 68.2 Return on net assets (%) 2 10.1 Average operating net assets 905.6 1 Underlying EBIT excludes the $6.6M one-off acquisition accounting adjustment. 2 R

  16. Slide 16: Minova

    Minova Sales $332M; EBIT $62M; Net Assets $906M; Pro forma RONA 10.1% A$M 80 75 3 10 70 (7) 65 62 61 (4) (1) 60 55 50 FY06 Business Cost AIFRS Acq FX Amortisation FY07 EBIT Pro-rata Growth Synergies Accounting EBIT Adj  Underlying EBIT growth of 12%  Result includes AIFRS one off acquisition  Rob

  17. Slide 17: Chemical Services

    Chemical Services Year ended 30 September (A$M) 2007 2006 % Sales 425.1 477.0 10.9 ” EBITDA 87.8 85.0 3.3 “ EBITDA margin (%) 20.7 17.8 15.9 “ EBIT 68.7 67.1 2.4 “ EBIT margin (%) 16.2 14.1 14.9 “ Underlying EBIT 1 65.8 59.1 11.3 “ Return on net assets (%) 17.4 17.7 Average operating net assets 394

  18. Slide 18: Chemical Services EBIT margin

    Chemical Services Sales $425M; EBIT $69M; Average Net Assets $394M; RONA 17% 80 18% 70 16% 14% EBIT MARGIN 60 EBIT A$M 12% 50 10% 40 8% 30 6% 20 4% 10 2% 0 0% 2004 2005 2006 2007 1st Half EBIT 2nd Half EBIT EBIT MARGIN  Strong growth in Mining Chemicals  Loss of A&R earnings following  Acceptance

  19. Slide 19: Chemnet

    Chemnet Year ended 30 September (A$M) 2007 2006 % Sales 927.7 987.4 6.0 ” EBITDA 66.4 66.0 0.6 “ EBITDA margin (%) 7.2 6.7 7.1 “ EBIT 58.7 57.7 1.7 “ EBIT margin (%) 6.3 5.8 8.3 “ Return on net assets (%) 16.9 15.4 Average operating net assets 346.4 375.6 Underlying EBIT in line with pcp US PP Conf

  20. Slide 20: Chemnet EBIT margin

    Chemnet Sales $928M; EBIT $59M; Average Net Assets $346M; RONA 17% 90 12% 80 10% 70 EBIT MARGIN 60 8% EBIT A$M 50 6% 40 30 4% 20 2% 10 0 0% 2004 2005 2006 2007 1st Half EBIT 2nd Half EBIT EBIT MARGIN  Restructure has delivered cost benefits  Lower volumes due to downturn in  Investment in sales a

  21. Slide 21: Orica Consumer Products

    Orica Consumer Products Year ended 30 September (A$M) 2007 2006 % Sales 826.3 785.0 5.3 “ EBITDA 116.3 111.5 4.3 “ EBITDA margin (%) 14.1 14.2 0.9 ” EBIT 101.6 97.3 4.4 “ EBIT margin (%) 12.3 12.4 0.8 ” Underlying EBIT1 111.1 97.3 14.2 “ Return on net assets (%) 43.7 44.4 Average operating net asse

  22. Slide 22: Orica Consumer Products EBIT margin

    Orica Consumer Products Sales $826M; EBIT $102M; Average Net Assets $233M; RONA 44% 120 14% 100 12% 10% 80 EBIT MARGIN EBIT A$M 8% 60 6% 40 4% 20 2% 0 0% 2004 2005 2006 2007 1st Half EBIT Yates Restructure Impact 2nd Half EBIT EBIT Margin Reported EBIT Margin  Record result, driven by growth in mos

  23. Slide 23: Corporate centre and other support services

    Corporate centre and other support services Year ended 30 September (A$M) 2007 2006 $ Corporate centre costs 39.3 36.3 3.0 ” Other support costs 13.7 14.4 0.7 “ TOTAL COSTS 53.0 50.7 2.3 “  Qenos doubtful debt provision reversal  Takeover defence and unsuccessful ($8M) – non-recurring M&A bid cos

  24. Slide 24: Capital management - highlights

    Capital management - highlights Year ended 30 September 2007 2006 Net Debt 1 (A$M) 1,305.7 302.1 Net Interest expense (A$M) 122.6 92.2 Interest Cover (times) 6.6 7.1 Cash Conversion 2 (%) 63.8 52.5 Rolling TWC to Sales (%) 14.8 16.6 Gearing (%) 33.2 10.2 Gearing adjusted (%) 3 39.6 18.4 Share Buybac

  25. Slide 25: Cashflow

    Cashflow Year ended 30 September (A$M) 2007 2006 $ EBITDA 995.9 814.6 181.3 “ Net interest paid (108.3) (90.3) 18.0 ” Net tax paid (141.4) (101.6) 39.8 ” Trade working capital movement (49.2) (212.6) 163.4 “ Non trade working capital movement (172.7) 3.8 176.5 ” Net operating cash flows 524.3 413.9

  26. Slide 26: Net debt and gearing

    Net debt and gearing Target gearing range shaded 1,600 50 Gearing and Adjusted Gearing % 1,400 40 Net Debt (A$M) 1,200 30 1,000 800 20 600 10 400 200 0 HY01 FY01 HY02 FY02 HY03 FY03 HY04 FY04 HY05 FY05 HY06 FY06 HY07 FY07 Accounting gearing 33.2% Adjusted gearing 39.6% (SPS securities notionally 50%

  27. Slide 27: Cash Conversion

    Cash Conversion1 100% 87.8% 90% 80% 75.2% 68.1% 70.2% 70% 62.2% 63.8% 60% 52.5% 50% 40% 2001 2002 2003 2004 2005 2006 2007 1 Cash conversion is calculated as EBITDA add/less movement in working capital less sustenance capital spend. US PP Conference - Orica Full Year Results 2007 27

  28. Slide 28: Rolling TWC to Sales %

    Rolling TWC to Sales % 25.0% TWC Project started May 2006 20.0% 15.0% 10.0% 5.0% 1 2 3 4 5 6 7 '0 '0 '0 '0 '0 '0 '0 pt pt pt pt pt pt pt Se Se Se Se Se Se Se Continuous improvement Reduced from 17.5% in May 2006 to 14.8% in 2007 US PP Conference - Orica Full Year Results 2007 28

  29. Slide 29: Capital expenditure

    Capital expenditure 160 120% Sustenance Spend A$M as a % of depreciation 140 100% 120 80% 100 60% 80 40% 60 20% 40 0% 2001 2002 2003 2004 2005 2006 2007 Sustenance % of Depreciation Sustenance capital $139M and Depreciation $153M in 2007 US PP Conference - Orica Full Year Results 2007 29

  30. Slide 30: Capital management - 2008

    Capital management - 2008 • 2008 Focus – cash generation • Restoring gearing to our target range • Credit Rating – committed to BBB+ – Underwritten DRP US PP Conference - Orica Full Year Results 2007 30

  31. Slide 31: Capital Management - Portfolio

    Capital Management - Portfolio • Have been active over a number of years in reshaping portfolio • We view the shape and composition of Orica as a continual “work in progress” US PP Conference - Orica Full Year Results 2007 31

  32. Slide 32: Supplementary information

    Supplementary information

  33. Slide 33: EBIT contribution by business platform

    EBIT contribution by business platform1 September 2006 2 September 2007 3,4 Chemnet Chemical Chemnet 9% 7% Services Chemical 8% Services 11% Minova 9% Consumer Products Mining Mining Consumer Services 15% Services Products 64% 65% 12% 1 Excludes corporate costs 2 September 2006 EBIT excludes earning

  34. Slide 34: Gross sales by geography

    Gross sales by geography September 2006 1 September 2007 Europe Europe Asia 7% 13% 8% Asia 8% Latin America 10% Australia Australia 49% Latin America 45% 12% North America 17% North America New Zealand 15% New Zealand 9% 7% 1 September 2006 sales exclude IPL US PP Conference - Orica Full Year Result

  35. Slide 35: Net interest expense

    Net interest expense Year ended 30 September (A$M) 2007 2006 $ Net interest expense 123 92 31 “ Comprising: Interest on net debt 113 101 12 “ Less: Capitalised interest (1) (14) 13 ” Add: Unwinding of discount on provisions 11 5 6“ Net interest expense 123 92 31 “ Interest on net debt calculated as

  36. Slide 36: Impact of Excel – gearing (A$M)

    Impact of Excel – gearing (A$M) Rating Pro-forma Agency Post Excel Current borrowings 582.7 582.7 Non-current borrowings 1,093.7 1,868.7 SPS adjustment 2 250.0 250.0 Less: Cash (370.7) (370.7) Net Debt 1,555.7 2,330.7 Parent entity equity 1 2,566.8 2,566.8 Minority interests 60.8 60.8 SPS adjustment

  37. Slide 37: Step-Up Preference Securities (SPS)

    Step-Up Preference Securities (SPS) • SPS treated as 100% equity for financial reporting purposes • SPS distributions are treated as dividends and NOT interest • EPS calculation adjusted for SPS distributions on an after tax basis • Rating agencies treat SPS as 50% equity / 50% debt • Income tax ben

  38. Slide 38: Impact of SPS – gearing (A$M)

    Impact of SPS – gearing (A$M) Reported per Rating Accounts Agency Current borrowings 582.7 582.7 Non-current borrowings 1,093.7 1,093.7 SPS adjustment 2 - 250.0 Less: Cash (370.7) (370.7) Net Debt 1,305.7 1,555.7 Parent entity equity 1 2,566.7 2,566.7 Minority interests 60.9 60.9 SPS adjustment 2 -

  39. Slide 39: Impact of SPS – interest cover (A$M)

    Impact of SPS – interest cover (A$M) Reported per Rating Accounts Agency Financial expense 157.4 157.4 Financial income (34.8) (34.8) SPS distribution adjustment 1 - 19.5 Net borrowing costs 122.6 142.1 EBIT 812.7 812.7 Less net profit attributable to minorities - (25.7) Adjusted EBIT 812.7 787.0 In

  40. Slide 40: Debt maturity – long term debt

    Debt maturity – long term debt A$M 300 275 250 225 200 USD 175 NZD 150 EUR 125 CAD 100 AUD 75 50 25 0 2008 2009 2011 2013 2015 2016 2017 2019 Average term of debt is approximately 7 years NB: The time scale on the table above is not linear, as some years have no debt repayment so have been excluded

  41. Slide 41: Foreign currency - snapshot

    Foreign currency - snapshot Material exposures include: Offshore EBIT (Translation) Transactional Exposures • North America • AUD/USD • Europe • USD/LATAM region • New Zealand • USD/CAD • LATAM • NZD/USD • Nordics • NOK/SEK Net impact of a 1% move in exchange rates on a diversified basket of currenc

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