Iluka Resources Limited · ASX:ILU
Iluka Resources — H1 2010 Earnings Presentation
36 slides from Iluka Resources's earnings presentation, Aug 26, 2010
Slide 1: 2010 1st Half Results
For personal use only 2010 1st Half Results Iluka Resources Limited 26 August 2010
Slide 2: Disclaimer – Forward Looking Statements
Disclaimer – Forward Looking Statements For personal use only This presentation contains information that is based on projected and/or estimated expectations, assumptions and outcomes. These forward-looking statements are subject to a range of risk factors associated, but not exclusive, with potenti
Slide 3: 1st Half Overview
1st Half Overview For personal use only • Demand recovery across zircon and high grade titanium dioxide products • Significantly improved EBITDA • Reported earnings better than initial 2010 expectation • New operations ramped up; but 1st half impacted by residual issues - sales contribution from low
Slide 4: Main Features of 1st Half Results
Main Features of 1st Half Results Comparison with 1st Half 2009 For personal use only Mineral Sands Sales Volumes Ï 51.1% - all high value product sales volumes up USD Product Pricing Ï Higher contract TiO2, lower average zircon pricing but upward trend Mineral Sands Revenue Ï 94.4% to $378.6 millio
Slide 5: Key Factors Influencing Results
Key Factors Influencing Results For personal use only Positive: • Sales volumes - strong but not uniformly recovered to pre GEC levels • Better product mix (higher sales of higher value products) • Zircon price momentum • Higher (but contract constrained) titanium dioxide prices • Lower cash cost of
Slide 6: Group Results
Group Results For personal use only $m 1H 2009 1H 2010 % change Mineral Sands Revenue (pre hedging) 194.8 378.6 94.4 EBITDA 59.6 115.4 93.6 Depreciation and Amortisation (83.5) (101.5) (21.6) EBIT (23.9) 13.9 N/A Net Interest and Financing Costs (8.4) (25.6) (204.8) Significant non-cash items (67.6)
Slide 7: Mineral Sands Results
Mineral Sands Results For personal use only $m 1H 2009 1H 2010 % change Mineral Sands Revenue (pre hedging) 194.8 378.6 94.4 EBITDA Eucla / Perth Basins 41.8 46.2 10.5 Murray Basin 17.7 39.0 120.3 US Operations 14.2 20.2 42.3 Exploration and Other (7.4) (10.1) (36.5) Total Mineral Sands EBITDA (pre
Slide 8: EBITDA 1st Half 2010 versus 1st Half 2009
EBITDA 1st Half 2010 versus 1st Half 2009 For personal use only A$M ILUKA GROUP Iluka Group EBITDA EBITDA 2010 1H 2010 vs vs 1H 2009 2009 250 134.7 (9.6) 200 150 3.1 3.8 115.4 48.8 (108.9) (1.3) (14.9) 100 59.6 50 0 2009 Sales vol Sales mix Sales price Sales costs Restructure Other MAC FX 2010 EBITD
Slide 9: Net Profit After Tax 1st Half 2010 versus 1st Half 2009
Net Profit After Tax 1st Half 2010 versus 1st Half 2009 For personal use only A$M Iluka GroupGROUP NPAT 1HNPAT 2010 vs 1H 2009 ILUKA 2010 vs 2009 100 94.3 75 (6.8) 50 25 47.3 2.2 0 34.2 (76.2) 2.7 (22.9) (6.6) (12.6) (0.9) -25 (13.9) (10.4) (43.6) -50 2009 Sales vol Sales mix Sales price Sales costs
Slide 10: Mining Area C Royalty
Mining Area C Royalty For personal use only 1H 2009 1H 2010 % change Annual Production to 30 June MDMT 37.8 42.5 12.4 Sales Volume to 30 June MDMT 19.5 20.4 4.6 Royalty Income $m 23.9 30.7 28.5 Capacity Payments $m 8.0 5.0 (37.5) Iluka EBIT $m 31.7 35.5 12.0 Comments • Higher iron ore sales volumes
Slide 11: 1st Half 2010 Cash Flow and Net Debt
1st Half 2010 Cash Flow and Net Debt For personal use only $m 1H 2009 FY 2009 1H 2010 % change pcp Opening Net Debt (215.7) (215.7) (382.1) (77.1) Operating Cash Flow (94.4) 83.8 42.6 N/A MAC Royalty 28.2 55.2 19.8 (29.8) Other 0.4 2.1 1.3 225.0 Exploration (10.2) (20.0) (7.6) 25.5 Net Interest (6.0
Slide 12: Net Debt Movement
Net Debt Movement For personal use only A$M ILUKA GROUP Iluka Group NET DEBT Net Debt 1H -2010 H1 10 450 (9.6) 439.0 (13.4) (81.5) 425 5.3 400 382.1 375 350 (1.5) (12.3) 42.6 (7.6) 325 19.8 1.3 300 Opening Net Operating MAC Royalty Other Exploration Interest Tax Capex - JA- Capex - Other Asset sales
Slide 13: Iluka Sales - Zircon
Iluka Sales - Zircon For personal use only Zircon Sales kt 300 200 100 • Strong recovery in sales 0 Asia China Europe Americas Other • China = pre GEC levels -100 1H 2008 2H 2008 1H 2009 2H 2009 1H 2010 Change • Sound recovery in Europe (1H09 to 1H10) and North America • Iluka not able to meet all S
Slide 14: Zircon Market Conditions
Zircon Market Conditions For personal use only • Strong recovery in demand in all main markets from GEC levels • China imports running at pre GEC levels • Industry inventories at historically low levels • Iluka unable to satisfy customers’ full demand and allocating volumes • Low customer inventorie
Slide 15: Zircon Price Trends
Zircon Price Trends For personal use only • Iluka actions: - 1 April price increase (partly offset by higher freight costs into China) - 1 July price increase (bigger than 1 April) – full flow through expected - working with customers in tight supply situation • 2nd half average zircon price expecte
Slide 16: Zircon Supply Crunch?
Zircon Supply Crunch? For personal use only Zircon Supply • Few material new zircon sources Induced New Projects at 0%, 25% and 50% Zircon - primary contribution from existing suppliers price rises (on 2008 levels) ktpa • Even with advent of Jacinth-Ambrosia, industry 1800 zircon:TiO2 production rat
Slide 17: Iluka Sales – Rutile and Synthetic Rutile
Iluka Sales – Rutile and Synthetic Rutile For personal use only Rutile and Synthetic Rutile Sales kt 400 300 200 100 • North America and Europe 0 recovery continued Asia China Europe Americas Other -100 • Iluka sells only minor 1H 2008 2H 2008 1H 2009 2H 2009 1H 2010 Change volumes of high grade (1H
Slide 18: High Grade Titanium Dioxide Market Conditions
High Grade Titanium Dioxide Market Conditions For personal use only • Final year of Iluka “cap and collar” contractual arrangements for rutile • Iluka considering contractual arrangements for rutile and SR sales arrangements from 2011 • Iluka has sold small volumes of “spot” SR at prices materially
Slide 19: High Grade Titanium Dioxide Market Dynamics
High Grade Titanium Dioxide Market Dynamics For personal use only • Demand recovery for high grade titanium dioxide feedstocks • Emerging industry situation of insufficient high quality supply • Iluka rutile volumes fully contracted for 2010 • Slower than targeted Murray Basin ramp up has exacerbate
Slide 20: High Grade Titanium Dioxide Supply Crunch?
High Grade Titanium Dioxide Supply Crunch? For personal use only High Grade Titanium Dioxide Supply Induced New Projects at 0%, 25% and 50% Rutile price rises (on 2008 levels) • Energy cost increases in South Africa likely to ktpa result in slag TiO2 production cost rises of over 3500 Current Produc
Slide 21: Tile Consumption
Tile Consumption Developing Economies Constitute Major Demand For personal use only Source: Ceramic World Review Source: IMF • China, Brazil, India, Iran and Indonesia consume over half of the world’s tiles • Zircon intensity of use in these economies remains well below developed economies • These e
Slide 22: Global Zircon Demand
Global Zircon Demand Underpinned by Developing Economy Demand For personal use only Global Zircon Demand Scenarios (1990 - 2020) Demand Scenarios • Based on modest Chinese demand growth from 2011 of 6% p.a. (~ one third of recent levels) and flat rest of world demand, global demand growth equates to
Slide 23: Pigment and Tile Consumption
Pigment and Tile Consumption Developing Economy Demand and Low Intensity of Use For personal use only Pigment and GDP per Capita (2008) Tiles and GDP per Capita (2008) Pigment (kg) / capita Tile sqm / capita 9 6 UAE = 20 Singapore Saudi 8 Arabia Spain Finland 5 7 6 4 Iran 5 3 Brazil 4 Germany 3 2 Ch
Slide 24: China and India
China and India Exemplars of Developing Economy Demand For personal use only Pigment and GDP per Capita (1980 - 2009) Tiles and GDP per Capita (1997^ - 2008) Pigment (kg) / capita Tile sqm / capita 0.9 2.5 India China India China 0.8 2008 GEC impact 2 0.7 2009 0.6 1.5 0.5 1997 0.4 1 0.3 0.2 0.5 2009
Slide 25: China and India Urbanisation
China and India Urbanisation Floor Space Linked to Tile Usage For personal use only Annual Urban Floor Space Construction Required Urban Population Per Annum 2010 to 2030 Million people Billion sqm 2 1000 1990 2005 2025 800 1.5 600 1 400 0.5 200 0 0 China India China India Source: McKinsey Consultan
Slide 26: 2nd Half 2010 Factors
2nd Half 2010 Factors For personal use only • Higher 2nd half EBITDA versus 1st half, based on: - expected higher production / sales - higher average zircon price • Reported earnings in 2nd half influenced by: - D&A which is expected to be 2nd half weighted (~55% of $220m guidance) - Higher expected
Slide 27: Supplementary Slides
For personal use only Supplementary Slides
Slide 28: 1st Half 2010 EBITDA
1st Half 2010 EBITDA For personal use only $m 1H 2009 1H 2010 % change pcp Mineral Sands Revenue (pre hedging) 194.8 378.6 94.4 EBITDA Mineral Sands 66.3 95.3 43.7 Currency Hedging and Foreign Exchange (21.7) (1.4) 93.5 Mining Area C 31.7 35.5 12.0 Corporate and Other (16.7) (14.0) 16.2 Total EBITDA
Slide 29: Cash Costs of Final Products Produced
Cash Costs of Final Products Produced For personal use only 1H 2009 2H 2009 1H 2010 % change pcp Z/R/SR1 Production (kt) 476.8 332.5 450.3 (5.6) Saleable Ilmenite (kt) 162.8 179.0 231.0 41.9 Final Product Produced (kt) 639.6 511.5 681.3 6.5 Total Cash Cost (A$m) 285.0 168.6 262.5 7.9 Cash Cost / ton
Slide 30: Capital and Exploration Expenditure (Cash)
Capital and Exploration Expenditure (Cash) For personal use only A$m 1H 2009 1H 2010 % change Capital Expenditure 234.3 94.9 59.5 Exploration 10.2 7.6 25.5 Total 244.5 102.5 58.1 30
Slide 31: 1st Half 2010 Production
1st Half 2010 Production For personal use only (kt) 1H 2009 1H 2010 % change Zircon 164.9 163.2 (1.0) Rutile 73.1 113.2 54.9 Synthetic Rutile 238.8 173.9 (27.2) Ilmenite - Saleable 162.8 231.0 41.9 Ilmenite - Upgradeable 319.5 118.1 (63.0) 31
Slide 32: Eucla / Perth Basins Financials
Eucla / Perth Basins For personal use only Financials 1H 2009 1H 2010 % change Sales Revenue $m 140.9 204.2 44.9 Total Cash Production Costs $m (205.8) (161.5) 21.5 Depreciation and Amortisation $m (59.2) (43.0) 27.4 Inventory Movements $m 123.0 18.0 (85.4) Cost of Goods Sold $m (142.0) (186.5) (31.
Slide 33: Murray Basin Financials
Murray Basin For personal use only Financials 1H 2009 1H 2010 % change Sales Revenue $m 31.0 100.9 225.5 Total Cash Production Costs $m (49.0) (77.0) (57.1) Depreciation and Amortisation $m (15.0) (47.5) (216.7) Inventory Movements $m 41.6 21.6 (48.1) Cost of Goods Sold $m (22.4) (102.9) (359.4) 1 O
Slide 34: US Operations Financials
US Operations For personal use only Financials 1H 2009 1H 2010 % change Sales Revenue $m 22.9 73.5 221.0 Total Cash Production Costs $m (30.2) (24.0) 20.5 Depreciation and Amortisation $m (9.3) (9.4) (1.1) Inventory Movements $m 22.1 (29.1) N/A Cost of Goods Sold $m (17.4) (62.5) (259.2) 1 Other Cos
Slide 35: Currency Hedging Arrangements
Currency Hedging Arrangements For personal use only Face Value Period Instrument Type US$m Strike Price Average Rate July – December 2010 Purchased Options1 150.0 0.900 - Forward FX Contracts2 41.5 - 0.874 1 The effect of the purchased option is that, for the amount of US$ receipts hedged, if the A$
Slide 36: Iluka Resources Limited
For personal use only Iluka Resources Limited For further information, contact: Robert Porter General Manager, Investor Relations robert.porter@iluka.com +61 3 9225 5481 / +61 (0) 407 391 829 www.iluka.com