Iluka Resources Limited · ASX:ILU
Iluka Resources — H1 2003 Earnings Presentation
34 slides from Iluka Resources's earnings presentation, August 2003
Slide 1: Investor Presentation 2003 Half Year Results
ILUKA Investor Presentation 2003 Half Year Results August 2003
Slide 2: Overview
ILUKA 1 Overview 2 Financial Performance 3 Operational Performance and Outlook 4 Market Outlook 5 Progress Against Strategic Objectives 6 Concluding Comments 7 Appendices
Slide 3: Highlights Year to Date
Highlights Year to Date ILUKA Improved first half production performance in WA and USA Good progress with MnM Growth beyond mineral sands investment framework finished Interim dividend franking increased US private debt placement completed (US$100 million) Georgia USA expansion underway Murray Basin
Slide 4: Financial Performance
ILUKA 1 Overview 2 Financial Performance 3 Operational Performance and Outlook 4 Market Outlook 5 Progress Against Strategic Objectives 6 Concluding Comments 7 Appendices
Slide 5: 2002 Group Profit After Tax v 2003
2002 Group Profit After Tax v 2002 ILUKA 60 50 40 A$ m 30 20 10 0 41.1 5.0 (4.7) 8.9 (9.7) 7.6 (3.9) 1.1 (8.7) 36.7 2002 +FX Price Prod. D&A Profit USA Discont’d Tax 2003 NPAT & Vol & Cost on Sale Stock Ops & & OEI NPAT Eff. of Write Other Assets Down Discontinued Operations & Other Other cost incre
Slide 6: First Half Financials
First Half Financials ILUKA Consolidated 2003 2002 Sales Revenue (A$m) 358.5 *443.4 Cashflow operating cashflow (A$m) 79 (17.2) cashflow per share (A$) 0.34 (0.08) Profitability EBITDA (A$m) 114 104 EBITDA/Sales (%) 32 23 EBIT (A$m) 53 48 NPAT (A$m) 37 41 EPS (A$) 16 19 * Includes A$57.7 million in
Slide 7: First Half Financials cont'd
First Half Financials cont’d ILUKA Consolidated 2003 2002 Gearing and interest cover gearing (%) 30 36 interest cover (times) 9 8.6 Dividend interim dividend (cents) 10 10 payout ratio (%) 63 53 franking (%) 92 20
Slide 8: First Half Profit Analysis (A$m)
First Half Profit Analysis (A$m) ILUKA 2003 2002 Change WA 64.9 54.4 10.5 USA (8.1) (3.9) (4.2) CRL 6.5 3.9 2.6 Coal 4.3 4.3 0.0 Corporate & Interest (27.6) (22.4) (5.2) Discontinued ops profit on sale of 0.0 0.8 (0.8) Koba Tin operating losses 0.0 (1.4) 1.4 Taxation (0.6) 5.4 (6.0) OEIs (2.7) 0.0 (
Slide 9: Operational Performance and Outlook
ILUKA 1 Overview 2 Financial Performance 3 Operational Performance and Outlook 4 Market Outlook 5 Progress Against Strategic Objectives 6 Concluding Comments 7 Appendices
Slide 10: WA Operations
WA Operations ILUKA 600,000 H1 production to plan 500,000 1 SR repairs shutdown 400,000 (SR3 in MW) of 3.5 k tonnes weeks 300,000 200,000 New mines operating in the MW 100,000 0 H1 sales close to plan despite shipping delays Ilmenite Zircon Rutile SR in MW H1 2003 H1 2002 H1 2001
Slide 11: CRL Operations
CRL Operations ILUKA 60,000 H1 R&Z production 14% below 2002 levels Lower production due to 40,000 difficult mining k tonnes conditions: 20,000 hard cutting at both sites; and face falls at Yarraman 0 Ilmenite Zircon Rutile H1 sales slightly below plan due to production and timing of shipments H1 20
Slide 12: Second Half Production Outlook - WA
Second Half Production Outlook - WA ILUKA Mid west SR4 shut down at the end of July to repair hot spots Engineering work to assess the impact of the hot spots is continuing - shutdown unlikely to be less than 6 weeks A 6 week shut down is not expected to impact on the MW full year SR production targ
Slide 13: Second Half Production Outlook - CRL
Second Half Production Outlook - CRL ILUKA Yarraman Dredge ladder damaged in mid-July Repair estimate A$1 million and 3 months (fully operational by mid-October) Insured for equipment damage and business interruption Dry mining to start in Q3 to feed the floating concentrator and continue after repa
Slide 14: Enterprise Project
Enterprise Project ILUKA Amity Mine Rehab Enterprise contains 80% of CRL’s reserve base (20 yrs) Slightly higher clay content- Dunwich Loading Facility Yarraman 5.5% Mine Capex of A$25 million to Bayside Mine modify Ibis concentrator, Rehab Pacific Ocean build/install a thickener plus site infrastru
Slide 15: Murray Basin Update
Murray Basin Update ILUKA Pre-feasibility study (PFS) for Douglas completed in H1 2003 PFS focused on refining Basin Mineral’s original plan to develop the Douglas mine build a minerals separation plant (MSP) near Hamilton Opportunities to optimise mineral processing operations in the Murray Basin w
Slide 16: Murray Basin Update cont'd
Murray Basin Update cont’d ILUKA Detailed feasibility study (DFS) underway to complete detailed engineering/design work for Douglas and the MSP and refine timing and capex estimates Subject to the DFS process, Iluka currently expects A$190 million in capex to develop the Douglas mine, MSP Project co
Slide 17: USA Operations
USA Operations ILUKA 150,000 H1 production lower than plan due to delayed final commissioning of 100,000 Old Hickory dry plant (Q2 production > plan) k tonnes H1 sales in line with plan 50,000 Underlying financials continuing to improve 0 despite a A$3.9 million write-down associated Ilmenite Zircon
Slide 18: Production Outlook - USA
Production Outlook - USA ILUKA Stronger H2 production performance from both sites Old Hickory expected to maintain current performance levels Green Cove Springs will benefit from MC1 relocation, and improved dredge performance Contribution from MnM production enhancements eg MC1 upgrade in Q3 Sales
Slide 19: Market Outlook
ILUKA 1 Overview 2 Financial Performance 3 Operational Performance and Outlook 4 Market Outlook 5 Progress Against Strategic Objectives 6 Concluding Comments 7 Appendices
Slide 20: Titanium Minerals Outlook
Titanium Minerals Outlook ILUKA Market outlook in terms of contract sales and demand for titanium minerals remains sound despite some pigment producers reporting softer markets for their products Iluka’s 2003 titanium minerals production is fully sold and sales volumes are still expected to increase
Slide 21: Zircon Outlook
Zircon Outlook ILUKA Zircon market remains robust overall but with ongoing market segment and geographic differences Overall zircon shipments are on schedule with any adjustments to timing being offset between operations Market being driven more so by premium product supply constraints rather than h
Slide 22: Progress Against Strategic Objectives
ILUKA 1 Overview 2 Financial Performance 3 Operational Performance and Outlook 4 Market Outlook 5 Progress Against Strategic Objectives 6 Concluding Comments 7 Appendices
Slide 23: MnM Program – Accelerated Timing
MnM Program – Accelerated Timing ILUKA 2002 2003 Aug 14-16 Oct 21 Oct-24 Jan 3 Feb-2 May 17 -18 June 23 June – 24 Nov Design Phase Training Wave 1 Wave 2 Training Wave 3 (8 weeks) (3 days) (12 weeks) (12 weeks) (3 days) (20 weeks) MW Mining, SW Mining, MW/SW SR Concentrating Concentrating And & Reha
Slide 24: MnM Wave 1 & 2 H1 Progress Report
MnM Wave – 1 & 2 H1 Progress Report ILUKA 389 cost saving and production/margin improvement initiatives Investment required for implementation – A$35 million At this stage these initiatives have the potential by end 2005 to deliver on a cumulative annualised basis: operating cost savings of A$59 mil
Slide 25: MnM Wave 1 & 2 H1 Progress Report cont'd
MnM Wave – 1 & 2 H1 Progress Report cont’d ILUKA Status of cost savings and production/margin improvements Annualised Annualised Cost Savings Production/ Investment Initiatives A$M Margins A$M A$m Complete 135 11 15.5 4 Underway 217 46 105.5 28 Not started 37 2 7 3 Examples of cost saving projects u
Slide 26: MnM Wave 1 & 2 H1 Progress Report cont'd
MnM Wave – 1 & 2 H1 Progress Report cont’d ILUKA Key cost savings and production/margin improvements areas Annualised Annualised Cost Savings Production & Investment Activity area A$M Margins A$M A$m Asset utilisation 9 32 16 Labour 12 2.5 4.5 Recovery levels 0.5 48 2 Maintenance/materials 6 15 2.5
Slide 27: Growth Beyond Mineral Sands
Growth Beyond Mineral Sands ILUKA Long term growth in mineral sands likely to be limited by major acquisitions being subject to anticompetitive scrutiny modest industry demand growth (average of 3% p.a) Despite some limitations mineral sands provides a platform to pursue broader growth options in in
Slide 28: Growth Beyond Mineral Sands cont'd
Growth Beyond Mineral Sands cont’d ILUKA Geography Product/sales Improvement Investment framework focus method potential improvement potential – under performing assets offer Initial focus largest turn potential familiarity with process – Low leverage existing operating capabilities Focus as Medium
Slide 29: Concluding Comments
ILUKA 1 Overview 2 Financial Performance 3 Operational Performance and Outlook 4 Market Outlook 5 Progress Against Strategic Objectives 6 Concluding Comments 7 Appendices
Slide 30: Concluding Comments
Concluding Comments ILUKA Production operations performance continuing to improve in response to better cost management, planning and operating practices underlying profitability of the USA operations improving provided there are no unforeseen production problems 2003 full year production should mee
Slide 31: Concluding Comments cont'd
Concluding Comments cont’d ILUKA H2 financial performance strong balance sheet position at the start of H2 will have a higher level of exposure to A$ FX in H2 compared with H1 higher production/sales, MnM benefits and lower tax may not offset the potential impact on full year earnings from FX moveme
Slide 32: Appendices
ILUKA 1 Overview 2 Financial Performance 3 Operational Performance and Outlook 4 Market Outlook 5 Progress Against Strategic Objectives 6 Concluding Comments 7 Appendices
Slide 33: Currency Position/FX Sensitivity
Currency Position/FX Sensitivity ILUKA Currency Position H2 2003 2004 2005 2006 2007 Hedged US$ 64.0 122.5 83.5 51.0 45.0 Av cash rate 0.5628 0.5426 0.5591 0.5557 0.5402 Estimated US$/A$ Sensitivity – 2003 Full Year 1 cent movement in the US$/A$ exchange rate impacts EBIT by approximately A$7 – 8 mi
Slide 34: Group H1 Production & Sales 2003 v 2002
Group H1 Production & Sales 2003 v 2002 ILUKA Product – k tonnes 2003 2002 Rutile production 75.2 82.6 Rutile sales 76.4 80.0 SR production 235.2 188.5 SR sales 200.3 253.5 Ilmenite production 707.8 636.8 Ilmenite sales 331.4 293.2 Zircon production 196.4 167.1 Zircon sales 179.5 149.5 Leucoxene pro