Dyno Nobel Limited · ASX:DNL
Dyno Nobel — H1 2020 Earnings Presentation
47 slides from Dyno Nobel's earnings presentation, May 11, 2020
Slide 1: Equity Raising & 1H FY 2020 Financial Results Presentation
Equity Raising & 1H FY 2020 Financial Results Presentation 11 May 2020 Jeanne Johns Managing Director & Chief Executive Officer ABN 42 004 080 264
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Incitec Pivot Limited (“IPL”). The information contained in this presentation is for information purposes only. The information contained in this presentation is not investment or financial product advice and is not intended to be used as the basis f
Slide 3: Equity Raising Summary
Equity Raising Summary Jeanne Johns Managing Director & Chief Executive Officer
Slide 4: Positioning For The Future
Positioning For The Future ▪ Taking pre-emptive action to strengthen the Balance Sheet to increase resilience in the current environment and provide financial flexibility to pursue disciplined organic growth opportunities Pre-emptive – Fully underwritten A$600 million Institutional Placement (Placem
Slide 5: Strengthened Balance Sheet with enhanced liquidity
Strengthened Balance Sheet with enhanced liquidity ▪ Repay drawn balances of syndicated Pro forma capitalisation as at 31 March 2020 facilities, with any remaining amount held as cash on deposit Impact of Equity ▪ Pro forma1 net leverage (Net Debt2 / A$ million Committed Drawn Raising5 Pro Forma1 EB
Slide 6: Key offer details
Key offer details Placement ▪ Fully underwritten Placement to raise A$600 million1 – It is intended that eligible institutional shareholders who bid for up to their ‘pro rata’ share of new fully paid ordinary size and shares (New Shares) under the Placement will be allocated their full bid, on a bes
Slide 7: Placement and SPP timetable
Placement and SPP timetable Event Date1 Record date for SPP 7:00pm (AEST), Friday 8 May 2020 Trading halt and announcement of Placement and SPP Monday 11 May 2020 Placement bookbuild Monday 11 May 2020 Announcement of outcome of Placement Tuesday 12 May 2020 Trading halt lifted – trading resumes on
Slide 8: 1H FY 2020 Financial Results
1H FY 2020 Financial Results Jeanne Johns Managing Director & Chief Executive Officer
Slide 9: Zero Harm
Zero Harm Continuous improvement in Health, Safety & Environmental measures Total Recordable Injury Frequency Rate (TRIFR)1 Potential High Severity Incidents2 FY21 Target: FY21 Target: 1.02 42 Sustainable 0.94 0.70 33 19 Improvement 0.82 0.80 13 0.65 0.70 1H 23 20 17 2H 1H18 FY18 1H19 FY19 1H20 FY18
Slide 10: Overview
Overview Jeanne Johns Managing Director & Chief Executive Officer
Slide 11: 1H FY 2020 Overview
1H FY 2020 Overview Resilient mining volumes, continued technology growth, improved manufacturing and strong cash flow management Earning Before Operating Net Profit Interest & Tax (EBIT) Cash Flows After Tax (NPAT) $159m1 $152m $65m 34% on 1H FY 2019 from ($35m) in 1H FY 2019 54% on 1H FY 2019 Manu
Slide 12: Strategic Review of Fertilisers
Strategic Review of Fertilisers Strategic review concluded, decision to retain ▪ Strategic review announced on 2 September 2019, three possible outcomes envisaged – sale, demerger or retain ▪ Formally explored market interest and demerger option ▪ Market uncertainty caused by COVID-19 brought the re
Slide 13: COVID-19 Impact & Response
COVID-19 Impact & Response Jeanne Johns Managing Director & Chief Executive Officer
Slide 14: COVID-19 Impact & Response
COVID-19 Impact & Response ▪ IPL’s products and services are vital to agriculture, mining and resources industries, which are essential services ▪ Mining and agriculture customers in our key regions continue to operate ▪ Pandemic related challenges in 1H FY 2020 were actively managed to allow operat
Slide 15: COVID-19 – Response Plan
COVID-19 – Response Plan Targeted operating cost savings of approximately $20m, Capital Expenditure deferrals of $40m in FY 2020 ▪ Short term non-essential operational spend pause, target approximately $20m in savings – Travel restrictions to business critical – Spend freeze on all non-essential goo
Slide 16: Group Financial Results
Group Financial Results Frank Micallef Chief Financial Officer
Slide 17: IPL Group Result 1H FY 2020
IPL Group Result 1H FY 2020 Revenue of A$1,848m, 6% vs pcp EBIT of A$159m, 34% vs pcp Group EBIT Movements EBIT A$ mill 300 1H19 Non-recurring items Americas Explosives APAC Fertilisers Explosives 250 (27) 65 200 (104) 9 (9) 12 (8) (6) 76 150 32 159 119 100 1H19 EBIT External Events Manufacturing Ma
Slide 18: Profit & Loss
Profit & Loss Summary of Corporate Costs, Borrowing Cost and Taxation 1H 1H 2020 2019 Change Return On Invested Capital (ROIC) A$M A$M % ▪ Focus on improving ROIC, underpinned by strategic growth Group EBIT 159 119 34% drivers Net Borrowing Cost (75) (68) 11% Corporate Costs of $11m, lower vs pcp Ta
Slide 19: Cash Flow Statement
Cash Flow Statement Improved cash flows following strong underlying operating performance in 1H FY2020 1H 2020 1H 2019 A$M A$M Operating Cash Flow Operating Cash Flows EBITDA 338 264 TWC movements (excl FX) (178) (313) ▪ Strong improvement in cash flows from operation Interest paid (77) (63) driven
Slide 20: Balance Sheet – Liquidity
Balance Sheet – Liquidity Prudent liquidity and maturity profile Available Debt Facilities and Balances Debt Facilities Commentary Facility Drawn Undrawn ▪ Sufficient liquidity and access to financing Committed Debt Facilities Maturity Facility Amount Amount Amount Amount millions Month/Year Issue C
Slide 21: Balance Sheet – Net Debt & Credit Metrics
Balance Sheet – Net Debt & Credit Metrics Debt balances and metrics in line with expectations Net Debt 31 Mar 30 Sep 31 Mar Net debt at seasonal high A$M 2020 2019 2019 ▪ Higher Net Debt driven by normal seasonal TWC Total Debt 2,528 2,626 2,481 increase Fair value & Other Adjustments 34 (7) (10) Lo
Slide 22: Capital Management & Returns
Capital Management & Returns Resilient Capital Structure Disciplined Capital Allocation Returns Focus & Capital Efficiency ▪ Strong Balance Sheet ▪ Focus on capital efficiency ▪ Focus on improving ROIC underpinned by Operating ▪ Evaluation of growth cash flows ▪ Pursuing range of low opportunities t
Slide 23: Operating Performance
Operating Performance Jeanne Johns Managing Director & Chief Executive Officer
Slide 24: Summary Of Segment Financial Performance
Summary Of Segment Financial Performance 1H FY 2020 Financial Results Revenue EBIT 1H20 1H19 Change 1H20 1H19 Change A$ million A$M A$M % A$M A$M % Dyno Nobel 1,261 1,215 4% 184 165 12% ‒ American Explosives 587 542 8% 84 78 8% ‒ Waggaman 96 124 23% 27 14 93% ‒ Ag & IC 86 78 9% 2 (4) nm* ▪ Dyno Nobe
Slide 25: Positioned In Most Attractive Explosives Markets
Positioned In Most Attractive Explosives Markets Dyno Nobel Explosives ▪ $155m of Group earnings in 1H FY 2020 ▪ Provide products and services vital to mining and resources industries in the US and Australia ▪ Continue to service our high quality and diverse global customer base across the Base & Pr
Slide 26: Americas Explosives
75% Americas Explosives Q&C B&PM 39% 36% 1H20 Revenue of US$392m, 1% vs pcp, EBIT of US$56m, flat vs pcp Revenue Revenue of A$587m, 8% vs pcp, EBIT of A$84m, 8% vs pcp Coal 25% Quarry & Construction Base & Precious Metals Coal 39% of Revenue 36% of Revenue 25% of Revenue ▪ Continued market and share
Slide 27: Asia Pacific Explosives
International Asia Pacific Explosives 12% Metallurgical Coal 47% 1H20 Revenue of A$492m, 5% vs pcp Revenue 41% B&PM EBIT of A$71m, 7% vs pcp ▪ Strong Moranbah manufacturing performance, production up 5% on pcp ▪ Higher Base & Precious Metals volumes driven by strong Australian customer demand ▪ Prem
Slide 28: Waggaman Agriculture & Industrial Chemicals
Waggaman Agriculture & Industrial Chemicals Segment Performance – 1H FY 2020 & Outlook Waggaman: Revenue of US$64m, 28% vs pcp, EBIT of US$18m, 79% vs pcp Ag & IC: Revenue of US$58m, 2% vs pcp, EBIT of US$1m, from (US$3m) loss in pcp Waggaman Operations Waggaman Production Agriculture & Industrial C
Slide 29: Manufacturing Reliability Update
Manufacturing Reliability Update Strong improvement in reliability during 1H FY 2020 Waggaman Phosphate Hill ▪ Reliability continues to improve, 1H FY2020 at ▪ Reliability improved substantially during 1H FY 83% (FY19: 76%) 2020 to 90% (FY19: 75%) ▪ Production at 91% of nameplate capacity in ▪ Issue
Slide 30: Fertilisers Asia Pacific
Fertilisers Asia Pacific Business Performance – 1H FY 2020 Revenue of A$617m, 11% vs pcp Domestic Distribution Volumes – 1H vs 2H EBIT loss of A$10m, $23m from pcp loss of A$33m Thousand metric tonnes 2,500 2,000 ▪ Strong distribution volumes, up 28% on pcp, driven by increased farmer demand toward
Slide 31: Fertilisers Asia Pacific
Fertilisers Asia Pacific Improving weather conditions driving Fertilisers demand in Eastern Australia Australian weather conditions improving Australian Rainfall Analysis1 Root Zone Soil Moisture1 ▪ April 2020 soil moisture levels highest since (1 Feb 2020 to 30 Apr 2020) (start of May 2020) 2017 ▪
Slide 32: Fertilisers Asia Pacific Strategic Focus
Fertilisers Asia Pacific Strategic Focus Investment proposition ▪ Leading market position in Australia’s largest fertilisers market ▪ Most expansive fertilisers distribution network in Eastern Australia ⎻ Broad access to farmers ⎻ Providing diversified crop exposures ▪ Long term growth driven by foo
Slide 33: Performance Update – April 2020
Performance Update – April 2020 ▪ Explosives sales volumes for April 2020 were largely in line with pcp as the business continues to benefit from good geographic and mining sector diversification ⎻ Mining volumes in Australia continue to be positive as the mining sector is operating well in a COVID-
Slide 34: Key Strategic Drivers & Strategic Priorities
Key Strategic Drivers & Strategic Priorities Jeanne Johns Managing Director & Chief Executive Officer
Slide 35: Key Strategic Driver – Manufacturing
Key Strategic Driver – Manufacturing Manufacturing Excellence strategy progressing to plan Improving plant reliability Ammonia Reliability(3) – Major Plants ▪ Reliability improvement plans driving results, with substantial improvement Overall % reliability in reliability at Phosphate Hill and Waggam
Slide 36: Premium Technology
Premium Technology Continued growth in technology sales during 1H FY2020 Significant growth in Premium Emulsions Premium Emulsion Electronic Detonator ▪ Significant growth in Asia Pacific, continued growth in (thousand metric tonnes sold) Systems Americas in 1H FY 2020 (million units sold) 400 6.0 ▪
Slide 37: Premium Technology – Our Future
Premium Technology – Our Future Technology agenda even more relevant post COVID-19 ▪ Semi-autonomous Delta E truck successfully tested Semi-autonomous Delta E truck in 1H FY 2020 4G Electronic Detonator, with differentiate GPS ▪ Successful release of second generation Delta E system (Delta E2) – all
Slide 38: Strategic Priorities Update – FY20
Strategic Priorities Update – FY20 ▪ Year-on-year improvement across our Zero Harm balanced scorecard remains our number one priority ▪ Strategy unchanged, but responsive to current economic environment ▪ COVID-19 response driving increased focus on servicing customers that are essential products an
Slide 39: Questions & Answers
Incitec Pivot Limited DYNO Dyno Nobel INNOVATION ON THE GROUND Questions & Answers
Slide 40: Additional Information
Incitec Pivot DYNO Dyno Nobel INNOVATION ON THE GROUND Additional Information Incitec Pivot INNOVATION ON THE GROUND
Slide 41: Dyno Nobel Americas
Dyno Nobel Americas EBIT Movements US$ mill 120 1H19 Non-recurring items 100 (13) 32 (12) 80 (7) (6) 6 12 60 75 63 40 1H19 EBIT Gas Disruption Waggaman Manufacturing Commodity Prices Waggaman Sales Thermal Coal demand Explosives - 1H20 EBIT (St Helens) Manufacturing at 91% Volumes / Fixed costs Grow
Slide 42: Dyno Nobel Asia Pacific
Dyno Nobel Asia Pacific EBIT Movements A$ mill 80 Contract Re-basing 75 5 (6) (6) 77 70 4 (3) 71 65 1H 19 EBIT Contract FY18 Western Australian Manufacturing International 1H20 EBIT Renewals Australia Contracts Volumes Performance (Moranbah) 42
Slide 43: Fertilisers Asia Pacific
Fertilisers Asia Pacific EBIT Movements A$ mill 60 1H19 Non-recurring Items Weather (7) 40 20 20 0 60 (85) (3) (10) 7 (33) -20 12 19 -40 -60 1H19 EBIT Qld Rail Outage Phosphate Hill Manufacturing Commodity Prices Foreign Exchange Distribution Qld Rail Outage Net Other 1H20 EBIT Reactor failure at 91
Slide 44: FY20 Earnings Sensitivities
FY20 Earnings Sensitivities Commodity Proxy Index EBIT Sensitivities Americas Ammonia1 CFR Tampa +/- US$10/mt = +/- US$5.8m Natural Gas2 Henry Hub +/- US$0.10/mmbtu = -/+ US$2.0m Urea3 FOB NOLA +/- US$10/mt = +/- US$1.8m FX EBIT Translation4 +/- A$/US$0.01 = -/+ A$4.8m Asia Pacific Di-Ammonium Phosp
Slide 45: Manufacturing Excellence
Manufacturing Excellence Ammonia Reliability – Major Plants % Reliability 100 95% 94% Target: 95% 1 92% 91% 90% 90% 86% 85% Baseline: 85% 2 83% 82% 80 76% 75% 60 Cheyenne Moranbah Waggaman Phosphate Hill FY16 - FY18 FY19 1H20 1. Baseline, target and actual performance are calculated using the Philli
Slide 46: Bowen Basin Coal, US Thermal Coal, Pilbara Iron Ore, Ammonia
Bowen Basin Coal1 US Thermal Coal Production1 Prime Overburden (mbcm pa) / Coal production (Mt pa) (Million short tonnes) 6,000 250 800 750 5,000 200 700 4,000 -16% 650 150 3,000 600 100 550 2,000 500 50 1,000 450 - - 400 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2018 2019 202
Slide 47: DNAP Contract Re-basing Impacts
DNAP Contract Re-basing Impacts Year-on-year EBIT impact FY20 FY21 FY22 $M A$m A$m A$m Western Australia contract losses (10) (3) 11 2019 Re-contracting (12) - - Total (22) (3) 11 Impacts from 2019 contract re-basing and 2018 lost contracts in Western Australia on Dyno Nobel Asia Pacific business ea