Dyno Nobel Limited · ASX:DNL
Dyno Nobel — 1H23 Earnings Presentation
36 slides from Dyno Nobel's earnings presentation, May 17, 2023
Slide 1: 2023 Half Year Financial Results Presentation
2023 HALF YEAR FINANCIAL RESULTS PRESENTATION 17 May 2023 Incitec Pivot Limited ABN 42 004 080 264 ASX Code: IPL OTC: INCZY
Slide 2: Disclaimer
Disclaimer Summary information This presentation has been prepared by Incitec Pivot Limited (“IPL”). The information contained in this presentation is in summary form and is based on the businesses currently conducted by IPL, which may be subject to change, and is provided for information purposes o
Slide 3: Disclaimer: Forward looking statements
Disclaimer Forward looking statements This document contains certain “forward looking statements”. Forward looking words such as “expect”, “would”, “could”, “may”, “predict”, “intend”, “will”, “believe”, “estimate”, “target” and “forecast” and other similar expressions are intended to identify forwa
Slide 4: Acknowledgement of Country
ACKNOWLEDGEMENT OF COUNTRY “I begin today by acknowledging the Traditional Custodians of the land on which we meet today and I pay my respects to their Elders past and present. I extend that respect to Aboriginal and Torres Strait Islander peoples joining us today.” 4
Slide 5: Overview
OVERVIEW Jeanne Johns Managing Director & Chief Executive Officer 5
Slide 6: 1H Key Messages
KEY MESSAGES 1H Key Messages 1 Strong progress on our strategic objectives 2 Privileged asset positions strengthened 3 Resilient results given short term headwinds 4 End market fundamentals remain supportive 5 Robust balance sheet, maintain capital discipline 6
Slide 7: Zero Harm
SAFETY Zero Harm Safety refresh program has improved to our performance Total Recordable Injury Frequency Rate (TRIFR)1 • TRIFR in 1H23 was 25% lower than the pcp • Process Safety Incidents have improved by 50% in 1H23 Process Safety Incidents2 • Excellent safety performance during Gibson Island clo
Slide 8: Our commitment to decarbonisation
ESG Our commitment to decarbonisation Delivering sustainable value for our shareholders and stakeholders Our operational (Scope 1&2) absolute GHG reduction pathway Recent Developments • 89.9% of shareholders voted to endorse progress SHORT TERM 2025 1 at FY22 AGM 5% TARGET • Developing Scope 3 GHG s
Slide 9: 1H23 result
FINANCIAL PERFORMANCE 1H23 result Resilient results through a commodity downturn Earnings1 Capital management EBIT Interim dividend Previously announced $400m $552M Down 3% from $568M in 1H22 10cps on-market buyback3 to commence in the next permissible trading window. Targeted for completion NPAT To
Slide 10: Strong progress – delivering our strategic agenda
STRATEGY Strong progress – delivering our strategic agenda First half achievements & next steps WALA MORANBAH GAS TITANOBEL PERDAMAN CORPORATE SUPPLY • Earnings volatility • Provides for • Delivering value from • Transforming recurring • Undertake previously reduced by monetising competitive gas acq
Slide 11: Crystalising value of the WALA investment
STRATEGY Crystalising value of the WALA investment1 Monetising excess ammonia while retaining long term low cost ammonia for DNA Key benefits Transaction overview • Monetises excess ammonia exposure at good point in the cycle (announced 20 March 2023) • Retains 25% of the equivalent volume of produc
Slide 12: Growing recurring earnings
STRATEGY Growing recurring earnings Strategic initiatives support quality earnings Crystalising value from WALA DNAP recontracting Perdaman supply agreement • Earnings benefit to DNA • Re-contracting progressing well • 20-year offtake up to 2.3Mt of urea • Increased security of supply • Benefits exp
Slide 13: Adoption of technology and value-add products
TECHNOLOGY Adoption of technology and value-add products Industry leading technology products delivering customer value and earnings growth Continued volume growth across major Premium emulsions technology lines Liquid Fertilisers 1H23 vs pcp growth rate FY18 to 1H23 CAGR Volume Revenue Volume Reven
Slide 14: Technology driving value growth
TECHNOLOGY Technology driving value growth Strong differentiated technology allows us to compete successfully and drives margin uplift Innovative technology Advanced digital solutions New markets • Advanced detonator technology • Connectivity across the blasting • Delta-E technology combined with pr
Slide 15: Year-on-year improvement in reliability
MANUFACTURING RELIABILITY Year-on-year improvement in reliability Focus on Phosphate Hill for further improvement Snapshot of major global ammonia plant reliability in 1H23 • WALA – above nameplate production in 1H23 • Turnarounds o Ammonia cooler at WALA performing better than expected. Planned rep
Slide 16: Dyno Nobel combined business Explosives
SEGMENT PERFORMANCE Dyno Nobel Actions taken in 1H23 to deliver strong underlying earnings performance in 2H23 • 10% underlying earnings growth with significant contributions from Combined business EBIT (A$M) 1H23 1H22 Chg. international businesses and technology/services to customers Dyno Nobel Asi
Slide 17: Dyno Nobel has significant growth potential
SEGMENT PERFORMANCE Dyno Nobel has significant growth potential Customer and service driven Margin enhancements Transformational • Strong opportunity to drive earnings • DNAP re-contracting • Evaluate accretive investments and growth across key exposures in Q&C partnerships that deliver long term an
Slide 18: Fertilisers Asia Pacific
SEGMENT PERFORMANCE Fertilisers Asia Pacific Commodity headwinds a key driver of lower result, demand recovery expected in 2H23 EBIT ($M) 1H23 1H22 Chg. • Earnings negatively impacted by lower DAP and higher gas prices Manufacturing Manufacturing 96 238 (60%) • FY23 Phosphate Hill production expecte
Slide 19: Favourable fundamentals
SEGMENT PERFORMANCE Favourable fundamentals Demand increasing in Australia and Internationally Global fertiliser demand by nutrient1 EBIT growth potential in Distribution business Forecast Perdaman commences Average Distribution EBIT Yara Nipro Liquid Ferts Nutrient Adv EEF FY19 FY20 FY21 FY22 Execu
Slide 20: Group Financial Results
Group Financial Results Paul Victor Chief Financial Officer 20
Slide 21: Group profitability per segment
FINANCIAL PERFORMANCE Group profitability per segment Improved manufacturing reliability offset by commodity headwinds EBITDA Contribution IPL Group ($M) 1H23 1H22 Change 1H23 1H22 Dyno Nobel Americas 391 252 55% Dyno Nobel Asia Pacific 79 79 0% Fertilisers 108 257 (58%) Corporate and other (26) (20
Slide 22: Working capital
FINANCIAL PERFORMANCE Working capital High working capital balance expected to unwind in 2H and normalise in FY24 Trade Working Capital as % of Sales1 Year-on-year movement ($M) 44 35 842 35 (12) (30) (8) 778 Year on Year 18.1% 18.3% 16.0% Mar-21 Mar-22 Mar-23 Mar22 Actual Translational FX Business
Slide 23: Investing for growth and quality earnings
FINANCIAL PERFORMANCE Investing for growth and quality earnings FY23 capital spend forecast remains on target, continued focus on optimal sustenance investment FY23 Forecast • Sustenance spend remains in line with 91 (on target) previous expectations FY23 Strategic & Growth • Turnaround spend is up
Slide 24: Disciplined capital allocation
FINANCIAL PERFORMANCE Disciplined capital allocation Prudent approach to deliver growing returns to shareholders ⎔ $121M ⎔ $25M 1H sustenance capex 1H turnaround capex 1H cash flow from operations of ⎔10 cps dividend 1 $194M $148M 60% franked, 54% payout ratio interim dividend1 ⎔ Undertake previousl
Slide 25: FY23 outlook
OUTLOOK FY23 outlook Underlying earnings favourably skewed to 2H23, actions taken set business up to deliver DNA: • Favourable Eastern Australia agricultural conditions forecast • Stronger 2H23 earnings expected from: ⎻ favourable sales mix and growing customer base • Farm economics are expected to
Slide 26: FY23 priorities consistent with strategy
PRIORITIES FY23 priorities consistent with strategy Continued focus Committed Progress Complete WALA Determine on Safety and to deliver DNAP transaction optimal timing Sustainability improved 2H recontracting and transition for demerger performance to new operating model Deliver results Strategy exe
Slide 27: Questions & Answers
Questions & Answers 27
Slide 28: Appendix
Incitec Pivot Limited INNOVATION ON THE GROUND
Slide 29: Group result
APPENDIX Group result 1H23 EBIT A$m Manufacturing Customer Facing Businesses Other 568 37 4 60 552 20 (1) (7) (7) (8) (4) (41) (70) Increase Decrease Total 1H22 Commodities Manufacturing Cost of Gas - Depreciation Turnarounds Moranbah Plant Higher DAP DNA DNAP Fertilisers Corporate & 1H23 & FX Relia
Slide 30: Dyno Nobel Americas
APPENDIX Dyno Nobel Americas 1H23 EBIT US$m Explosives Ag & IC WALA 44 260 15 51 182 3 (4) (2) (8) (4) (18) Increase Decrease Total 1H22 Technology Weather Turnaround Manufacturing Turnaround Commodities Manufacturing Depreciation Commodities 1H23 & Services Reliability Reliability - WALA sale 30
Slide 31: Dyno Nobel Asia Pacific
APPENDIX Dyno Nobel Asia Pacific 1H23 EBIT A$m 3 5 79 79 (4) (4) Increase Decrease Total 1H22 International Growth – Moranbah Plant – JV Income/Other 1H23 Technology Gibson Island Closure one-off costs 31
Slide 32: Fertilisers Asia Pacific
APPENDIX Fertilisers Asia Pacific 1H23 EBIT A$m Manufacturing Distribution 257 37 108 (139) (7) (41) Increase Decrease Total 1H22 Commodities & FX Cost of Gas - Phos Hill Higher DAP Commodity Volatility 1H23 Export Sales 32
Slide 33: Cash Fixed Costs
FINANCIAL PERFORMANCE Cash Fixed Costs1 Increase in Cash Fixed Costs driven by business growth and high inflation. 6 10 724 23 708 35 44 2% of Normalised Cash Fixed Costs 24 582 1H22 FX Translation Business Acquisitions Costs passed through Inflation Normalised Cash Fixed Costs Manufacturing Repairs
Slide 34: Focus on balance sheet strength
APPENDIX Focus on balance sheet strength Robust balance sheet supports growth in the business Net debt ($M) 1H23 1H22 • Buyback3 to commence in next permissible Reported1 1,418 1,386 trading window Including working capital facilities 1,691 1,651 • Balance sheet successfully deleveraged EBITDA 727 7
Slide 35: WALA offtake agreement
APPENDIX WALA offtake agreement Earnings impact of offtake agreement • The Waggaman ammonia offtake agreement between IPL and CF Estimated earnings impact (US $m)1 Industries includes the offtake of 200kst/yr of ammonia for up to 25 years, Cash changes to EBIT priced on a gas-backed formula at a lev
Slide 36: Turnaround schedule
APPENDIX Turnaround schedule Plant FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 Phosphate Hill, QLD Cheyenne, WY Moranbah, QLD St Helens, OR Sale expected to be Waggaman, LA1 completed prior to next turnaround (1) Cooler replacement deferred to Oct 2024 (FY25) to coincide with turnaround. 36