Orica Limited · ASX:ORI
Orica — Merger or Acquisition (July 2008)
48 slides from Orica's merger presentation, Jul 21, 2008
Slide 1: Pro Rata Entitlement Offer and Demerger of Consumer Products
For personal use only NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Pro Rata Entitlement Offer and Demerger of Consumer Products 21 July 2008
Slide 2: Important notice
Important notice For personal use only This presentation has been prepared by Orica Limited. The information contained in this presentation is for informational purposes only and does not constitute an offer to issue or arrange to issue, securities or other financial products. Nothing in this presen
Slide 3: Forward looking statements
Forward looking statements For personal use only This presentation includes “forward-looking statements” within the meaning of securities laws of applicable jurisdictions. Forward-looking statements can generally be identified by the use of forward- looking words such as “may”, “will”, “expect”, “in
Slide 4: Overview
Overview For personal use only Two significant transactions which position Orica for future growth #1 Pro Rata Entitlement Offer • Equal participation by eligible Orica shareholders • Provides Orica with significant financial flexibility to grow its mining services and chemicals businesses • Maintai
Slide 5: Pro Rata Entitlement Offer
For personal use only Pro Rata Entitlement Offer
Slide 6: Entitlement Offer rationale
Entitlement Offer For personal use only Strong underlying rationale for the Entitlement Offer • Provides Orica with long-term financial flexibility to pursue growth Provides platform strategies in the mining services and chemicals sectors for growth • Investments include ~US$550 million ammonium nit
Slide 7: Offer details
Offer details For personal use only • 1 for 8 accelerated pro rata entitlement offer to raise approximately $600 - $900 million Offer size • Approximately 27 - 40 million new Orica Ordinary Shares to be issued • Total amount raised and number of new shares will depend on the level of subscription un
Slide 8: Offer timetable
Offer timetable For personal use only Monday, 21 July (after market • Institutional Entitlement Offer opens close) Tuesday, 22 July • Trading halt commences Wednesday, 23 July (6.00 pm) • Institutional Entitlement Offer closes Thursday, 24 July (6.00 pm) • Institutional Bookbuild opens Friday, 25 Ju
Slide 9: Investment highlights
Investment highlights For personal use only • A global leader in mining services Market leading businesses • Australian and New Zealand leader in chemicals and branded coatings and home improvement products • Increased global exploration spend and strength in resources commodity volumes underpin gro
Slide 10: Growth opportunities
Growth opportunities For personal use only Expansion of Category Acquisitions Possible New bulk emulsion Minova into new expansion for ammonium nitrate plant in Australia territories OCP plant in Latin America Ammonium Global roll-out nitrate plant in of bolt and resin Bontang, business Indonesia –
Slide 11: Strengthening Orica's balance sheet
Strengthening Orica’s balance sheet For personal use only Pro Forma Balance Sheet Orica Adjusted Gearing1 Historical Pro forma Assuming Retail Entitlement Offer is fully subscribed Pro forma (Post 50 Assuming no subscription received under Retail Entitlement Offer or Retail Bookbuild Orica (Post Ins
Slide 12: Demerger of Consumer Products
For personal use only Demerger of Consumer Products
Slide 13: Demerger overview
Demerger overview For personal use only 9 Proposed Demerger of Consumer Products into separate ASX listed company 9 Consumer Products will be a stand-alone, leading premium branded coatings and home improvement products 9 Shareholders to have direct ownership of Consumer Products and greater investm
Slide 14: Demerger of Consumer Products
Demerger of Consumer Products For personal use only Proposed Demerger to separate Orica and Consumer Products into two separate ASX listed companies • 100% of Consumer Products shares to be distributed to eligible Orica ordinary shareholders • Orica shareholders to retain existing Orica shares • Dem
Slide 15: Orica's business evolution
Orica’s business evolution For personal use only Recent major acquisitions and divestments of non-core assets have sharpened Orica’s focus on the mining services sector Dyno Excel Strata Recent Dyno Nobel Nobel Minova Mining Control acquisitions assets Systems Systems 2006 2007 2008 Recent Incitec A
Slide 16: Orica's business evolution
Orica’s business evolution For personal use only Orica’s portfolio is now focused on mining services EBIT (2005) EBIT (2007)1 EBIT (2007 Pro Forma)1,2 Other Non-Mining Other Non-Mining Non-Mining 32% 11% 13% Mining Mining 53% 77% Mining 87% Consumer Products Consumer 12% Products 15% 1. 9 months of
Slide 17: Key characteristics of businesses
Key characteristics of businesses For personal use only Logical separation of businesses with fundamentally different operating characteristics and strategies Consumer Products 9 Global leader in explosives, underground strata 9 Leader in premium branded coatings and home support and cyanide (for us
Slide 18: Demerger rationale
Demerger rationale For personal use only • Fundamentally different business characteristics – Orica: a global leader in mining consumables and services; Australasian leader in chemical distribution – Consumer Products: domestic market leader in premium branded coatings and home improvement products
Slide 19: Pro forma financial overview
Pro forma financial overview For personal use only Profit & Loss Orica Year ended 30 September (A$m) 2007 Consumer Orica ex-Consumer Pro Forma Products Products Sales 5,527 4,701 826 1 EBITDA 1,005 880 126 EBITDA margin1 18.2% 18.7% 15.2% EBIT1 822 711 111 EBIT margin1 14.9% 15.1% 13.4% Balance Shee
Slide 20: Consumer Products' Board & senior management
Consumer Products’ Board & senior management For personal use only • Peter Kirby to be Chairman of Consumer Products • Garry Hounsell to be a Non-Executive Director of Consumer Products • Messers Kirby and Hounsell to retire from Orica Board at the time of the Demerger • Patrick Houlihan to be Manag
Slide 21: Indicative Demerger timeline
Indicative Demerger timeline For personal use only Announcement of proposed Demerger 21 July 2008 Documentation & preparation July – October 2008 ASIC review and court hearing to convene November/December 2008 shareholders meeting Dispatch of documentation to shareholders December 2008 Shareholder v
Slide 22: Approvals, regulatory issues & documentation
Approvals, regulatory issues & documentation For personal use only • Demerger Scheme Booklet • Independent expert’s report • ATO tax ruling - to confirm Demerger tax relief for Orica ordinary shareholders • Orica shareholder approval • Court approval (following shareholder approval) • ASX approval f
Slide 23: Orica – a global company focused on mining services and chemicals
For personal use only Orica – a global company focused on mining services and chemicals
Slide 24: Orica business platforms
Orica business platforms For personal use only Orica to operate with three key platforms post-Demerger • Core focus on mining services • Strong balance sheet • BBB+ credit rating • Global expansion opportunities • Financial flexibility Pro Rata Entitlement Offer and Demerger of Consumer Products 24
Slide 25: Orica Mining Services and Minova
Orica Mining Services and Minova For personal use only 1 • Clear global leader in the supply of • Global leadership in underground explosives and related services geotechnical stabilisation systems • Strong customer relationships • Low capital intensity and high margin • Well established R&D/technol
Slide 26: Orica Chemicals
Orica Chemicals For personal use only Mining Chemicals Watercare Chemnet • #2 global market position • Australian market leader • Clear market leader in in cyanide production in chloralkali products for chemical distribution in • Manufacturer of water treatment, mining Australia and New Zealand emul
Slide 27: Chemicals restructuring
Chemicals restructuring For personal use only Chemicals Services and Chemnet to be merged to extract ongoing cost savings and position for growth and improved customer service • Chemicals Services (comprising Mining Chemicals and Watercare) and Chemnet have operated with separate operations and mana
Slide 28: Orica business mix post-Demerger
Orica business mix post-Demerger For personal use only Mining focused but with significant diversity Orica EBIT by business mix (2007)1 Orica EBIT by geography (2007)1 Orica Mining Chemicals (exc. Chemicals Orica Mining Africa < 1% 4% Chemicals) 13% Asia 9% Latin America 11% Minova Australia and New
Slide 29: Senior management team
Senior management team For personal use only Experienced senior management team to remain after the Demerger Managing Director and Chief Executive Officer Graeme Liebelt Corporate Executive Director General Manager Strategy, General Manager, People & Office Finance M&A and Technology Community Noel
Slide 30: Mining services - attractive industry dynamics
For personal use only Mining services - attractive industry dynamics
Slide 31: Sustained increase in global exploration spend
Sustained increase in global exploration spend… For personal use only World mineral exploration (non-ferrous metals) (US$bn) 10.5 7.5 5.2 5.1 4.6 3.5 3.7 3.8 3.0 2.8 2.5 2.6 2.4 2.0 2.2 2.1 2.1 1.9 1990 1992 1994 1996 1998 2000 2002 2004 2006 … underpins future mine activity Pro Rata Entitlement Off
Slide 32: Strong growth expected in commodity resources
Strong growth expected in commodity resources For personal use only Global Demand Growth (2006–2015) Gold 4% Coal 31% Lead 33% Copper 33% Aluminium 36% Iron ore 37% Zinc 70% Nickel 83% Pro Rata Entitlement Offer and Demerger of Consumer Products 32
Slide 33: Driven by the Chinese economy and urbanisation
Driven by the Chinese economy and urbanisation For personal use only China real GDP growth (US$bn) Urbanisation of China 25,652 2006-2030 CAGR: 10% 61% 57% 18,486 54% 50% 12,676 45% 8,172 41% 4,696 2,701 2006 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 2030 Pro Rata Entitlement Offer and Demer
Slide 34: Urbanisation drives infrastructure and energy demands in China
Urbanisation drives infrastructure and energy demands in China… For personal use only Today 2015 2030 Total urban population 582m 733m 926m Urban population density Low High Note: Illustration only. Pro Rata Entitlement Offer and Demerger of Consumer Products 34
Slide 35: Which underpins global resources demand
… which underpins global resources demand For personal use only China’s share of the increase in yearly China’s share of global base metals global coal demand 2005–2030 by BTU1 growth 2000–2006 7% 7% 29% 35% 43% Rest of world 29% 93% 93% China 71% 71% 65% 57% Steel Aluminium Copper Zinc Nickel China
Slide 36: Chemicals – significant growth potential
For personal use only Chemicals – significant growth potential
Slide 37: Attractive market dynamics in Australia
Attractive market dynamics in Australia… For personal use only Australian imported chemicals (A$bn) 20.4 19.0 CAGR = 8% 18.1 16.4 14.6 14.7 14.9 13.3 Value (A$bn) 11.8 11.0 9.1 9.4 8.6 6.8 7.4 6.2 5.2 5.1 5.3 4.6 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Pro Rata Entitlement Offer and Demerg
Slide 38: Significant growth potential for Chemicals in Asia
… and significant growth potential for Chemicals in Asia For personal use only Asia Pacific chemicals (US$bn) CAGR = 10% 964 873 794 724 659 600 547 514 459 465 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Actual Forecast 964 873 794 724 659 600 547 14 Pro Rata Entitlement Offer and Demerger of
Slide 39: Consumer Products – a brand leader in the Australian/New Zealand markets
For personal use only Consumer Products – a brand leader in the Australian/New Zealand markets
Slide 40: A premium branded business
A premium branded business For personal use only Decorative Industrial Home & Woodcare Garden Care Coatings Coatings Automotive • Retail - Paint • Protective coatings • Stains • Build & Construct • Plant Food • Trade - Paint • Powder coatings • Varnishes • Repair & Fix • Plant Protection • Texture •
Slide 41: Dulux brand awareness high
Dulux brand awareness high… For personal use only Spontaneous Brand Awareness 9 Dulux high brand awareness 90% Dulux maintained over time 80% 9 Supported by increased investment 70% 9 More than twice competitors’ 60% awareness level 9 Competitors’ brand 50% awareness has declined over 40% the same p
Slide 42: With increasing market share
…with increasing market share For personal use only 9 Dulux’s market share has Market Share increased over time Dulux’s 9 Market position well established 9 Significant investment in marketing and R&D 9 Leader in customer service 2005 2006 2007 Pro Rata Entitlement Offer and Demerger of Consumer Pro
Slide 43: Strategic manufacturing and distribution sites
Strategic manufacturing and distribution sites For personal use only Pro Rata Entitlement Offer and Demerger of Consumer Products 43
Slide 44: Consumer Products financial overview
Consumer Products financial overview For personal use only Year ended 30 September (A$m) 2006 20071 Change Sales 785 826 +5.3% EBITDA 112 126 +12.8% EBITDA margin (%) 14.2% 15.2% EBIT 97 111 +14.2% EBIT margin (%) 12.4% 13.4% 1. Normalised for Yates restructuring provision ($9.5m). Pro Rata Entitlem
Slide 45: 2008 outlook
For personal use only 2008 outlook
Slide 46: 2008 outlook
2008 outlook For personal use only Affirmation of previous guidance • Subject to global economic conditions, group net profit (before individually material items) in 2008 is expected to be higher than that reported in 2007 • This is a result of an additional three months contribution from Minova, 11
Slide 47: Conclusion
For personal use only Conclusion
Slide 48: Conclusion
Conclusion For personal use only 9 Entitlement Offer to provide Orica with financial flexibility to grow its core businesses and maintain a strong balance sheet 9 Orica to become a more focused mining services and chemicals company through Demerger of Consumer Products 9 Demerger has potential to un